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Personnel Economics: The Economist's View of Human Resources

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  • Edward P. Lazear
  • Kathryn L. Shaw

Abstract

Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Many questions are asked. Why should pay vary across workers within firms--and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms use teams and how are teams used most effectively? How should all these human resource management practices, from incentive pay to teamwork, be combined within firms? Personnel economics offers new tools and new answers to these questions. In this paper, we display the tools and principles of personnel economics through a series of models aimed at addressing the questions posed above. We focus on the building blocks that form the foundation of personnel economics: the assumptions that both the worker and the firm are rational maximizing agents; that labor markets and product markets must reach some price-quantity equilibrium; that markets are efficient or that market failures have introduced inefficiencies; and that the use of econometrics and experimental techniques has advanced our ability to identify underlying causal relationships.

Suggested Citation

  • Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," NBER Working Papers 13653, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13653
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    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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