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Management Practices, Workforce Selection, and Productivity

In: Firms and the Distribution of Income: The Roles of Productivity and Luck

Author

Listed:
  • Stefan Bender
  • Nicholas Bloom
  • David Card
  • John Van Reenen
  • Stefanie Wolter

Abstract

We study the relationship among productivity, management practices, and employee ability using German data combining management practices surveys with employees' longitudinal earnings records. Including human capital reduces the association between productivity and management practices by 30%-50%. Only a small fraction is accounted for by the higher human capital of the average employee at better-managed firms. A larger share is attributable to the human capital of the highest-paid workers, that is, the managers. A similar share is mediated through the pay premiums offered by better-managed firms. We find that better-managed firms recruit and retain workers with higher average human capital.
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Suggested Citation

  • Stefan Bender & Nicholas Bloom & David Card & John Van Reenen & Stefanie Wolter, 2015. "Management Practices, Workforce Selection, and Productivity," NBER Chapters,in: Firms and the Distribution of Income: The Roles of Productivity and Luck National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13723
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    References listed on IDEAS

    as
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    11. Barth, Erling & Bryson, Alex & Davis, James C. & Freeman, Richard, 2014. "It’s where you work: increases in earnings dispersion across establishments and individuals in the US," LSE Research Online Documents on Economics 60604, London School of Economics and Political Science, LSE Library.
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    14. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2012. "The Long-Term Effects of UI Extensions on Employment," American Economic Review, American Economic Association, vol. 102(3), pages 514-519, May.
    15. Bauer, Thomas K. & Schmucker, Alexandra & Vorell, Mathias, 2008. "KMU und Arbeitsplatzdynamik : eine Analyse auf Basis der Beschäftigten-Historik-Datei," IAB Discussion Paper 200802, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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    18. Morten Bennedsen & Kasper Meisner Nielsen & Francisco Perez-Gonzalez & Daniel Wolfenzon, 2007. "Inside the Family Firm: The Role of Families in Succession Decisions and Performance," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 647-691.
    19. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 843-881.
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    Citations

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    Cited by:

    1. Broszeit, Sandra & Fritsch, Ursula & Görg, Holger & Laible, Marie-Christine, 2016. "Management Practices and Productivity in Germany," IZA Discussion Papers 10370, Institute of Labor Economics (IZA).
    2. Elizabeth Weber Handwerker & James R. Spletzer, 2016. "The Role of Establishments and the Concentration of Occupations in Wage Inequality," Research in Labor Economics,in: Inequality: Causes and Consequences, volume 43, pages 167-193 Emerald Publishing Ltd.
    3. Knutsson, Polina, 2018. "Sorting on Unobserved Skills into New Firms," Working Papers 2018:38, Lund University, Department of Economics.
    4. Thibault Fally & Benjamin Faber, 2016. "Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data," 2016 Meeting Papers 381, Society for Economic Dynamics.
    5. repec:eee:ecolet:v:155:y:2017:i:c:p:80-83 is not listed on IDEAS
    6. Dessein, Wouter & Prat, Andrea, 2019. "Organizational Capital, Corporate Leadership, and Firm Dynamics," CEPR Discussion Papers 13513, C.E.P.R. Discussion Papers.
    7. repec:eee:ecoser:v:26:y:2017:i:pb:p:329-344 is not listed on IDEAS
    8. Åsa Johansson, 2016. "Public Finance, Economic Growth and Inequality: A Survey of the Evidence," OECD Economics Department Working Papers 1346, OECD Publishing.
    9. Broszeit, Sandra & Fritsch, Ursula & Görg, Holger & Laible, Marie-Christine, 2016. "Management practices and productivity in Germany (Managementpraktiken und Produktivität in Deutschland)," IAB Discussion Paper 201632, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Labanca, Claudio & Pozzoli, Dario, 2018. "Coordination of Hours within the Firm," IZA Discussion Papers 12062, Institute of Labor Economics (IZA).
    11. Broszeit, Sandra & Laible, Marie-Christine, 2017. "Examining the link between health measures, management practices and establishment performance," IAB Discussion Paper 201726, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Görg, Holger & Hanley, Aoife, 2017. "Firms’ global engagement and management practices," Economics Letters, Elsevier, vol. 155(C), pages 80-83.
    13. Christopher Cornwell & Ian M. Schmutte & Daniela Scur, 2019. "Building a Productive Workforce: The Role of Structured Management Practices," CEP Discussion Papers dp1644, Centre for Economic Performance, LSE.
    14. Carsten Eckel & Stephen R. Yeaple, 2017. "Too Much of a Good Thing? Labor Market Imperfections as a Source of Exceptional Exporter Performance," NBER Working Papers 23834, National Bureau of Economic Research, Inc.
    15. A. Arrighetti & E. Bartoloni & F. Landini & C. Pollio, 2019. "Exuberant proclivity towards non-standard employment: evidence from linked employer-employee data," Economics Department Working Papers 2019-EP02, Department of Economics, Parma University (Italy).
    16. James Harrigan & Ariell Reshef & Farid Toubal, 2018. "Techies, Trade, and Skill-Biased Productivity," NBER Working Papers 25295, National Bureau of Economic Research, Inc.
    17. Andy Feng & Anna Valero, 2019. "Skill Biased Management: Evidence from Manufacturing Firms," CEP Discussion Papers dp1594, Centre for Economic Performance, LSE.
    18. Broszeit, Sandra & Fritsch, Ursula & Görg, Holger & Laible, Marie-Christine, 2016. "Management practices and productivity in Germany," Kiel Working Papers 2050, Kiel Institute for the World Economy (IfW).
    19. Bohne, Albrecht & Nimczik, Jan Sebastian, 2018. "Information Frictions and Learning Dynamics: Evidence from Tax Avoidance in Ecuador," IZA Discussion Papers 11536, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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