Insider econometrics: A roadmap with stops along the way

For the past twenty five years, economists have been building theories of the optimal management of firms. For example, economic models suggest that under some conditions, piece rate pay raises performance, and under other conditions, promotions tournaments raise performance. Some of these theories have been tested, others have not. Economists are now using new empirical research tools, that we label “insider econometrics,” to test the impact of management practices on productivity: to model how much productivity changes; to model why management practices raise productivity; and to examine which firms benefit and why from alternative management practices. The methodology we describe is “insider” because it uses inside knowledge and data from within firms. It is “econometrics” because the methodology is often the application of treatment effects methods to modeling changing management practices within firms. However, the methods and challenges of insider econometrics are unique, and we identify several key features that are important in undertaking empirical studies of workers' productivity. Now that more firms are keeping data on employees, it is time to improve our analysis of the empirical study of the productivity of workers within firms.     

Dogmatic trends in marxist sociology

The research program of theoretical pluralism would imply for sociology, to confront marxist with nonmarxist sociology. This seems useful only if both sociologies are refutable in principle. However, certain principles of marxist sociology prevent the refutation of its most fundamental hypotheses. This is shown in analyzing an often cited book by E. Hahn. The “basis” of marxist sociology is historical materialism. Thus, if hypotheses from marxist sociology are falsified, historical materialism is falsified too. Hahn maintains-without presenting any empirical evidence-that historical materialism has found the solution of all problems and thus cannot be refuted. Marxist sociology, however, is-according to Hahn-falsifiable. This statement and the thesis mentioned before are inconsistent, for if historical materialism is true, marxist sociology-which follows from historical materialism-cannot be wrong. But even if there would be no inconsistency, the following situation would be possible: Marxist sociology proves entirely wrong, but historical materialism (the “basis” of marxist sociology) will not be abandoned. Furthermore, Hahn maintains that by means of empirical research (observation and experiment) the central hypotheses of marxist sociology cannot be tested, namely the “essence of appearances.” But he is at a loss for arguments; so every hypothesis can be immunized against falsification by declaring that it describes the “essence” of certain “appearances.” One further strategy of immunization Hahn introduces, is the rule that in an explanation only marxist laws may be used. So it is not possible to confront marxist and nonmarxist hypotheses. This rule eliminates a very effective kind of criticism, namely the confrontation of inconsistent theories.     

False dichotomy alert: Improving subjective-probability estimates vs. raising awareness of systemic risk

Taleb et al. (2022) portray the superforecasting research program as a masquerade that purports to build “survival functions for tail assessments via sports-like tournaments.” But that never was the goal. The program was designed to help intelligence analysts make better probability judgments, which required posing rapidly resolvable questions. From a signal detection theory perspective, the superforecasting and Taleb et al. programs are complementary, not contradictory (a point Taleb and Tetlock (2013) recognized). The superforecasting program aims at achieving high hit rates at low cost in false-positives, whereas Taleb et al. prioritize alerting us to systemic risk, even if that entails a high false-positive rate. Proponents of each program should, however, acknowledge weaknesses in their cases. It is unclear: (a) how Taleb et al. (2022) can justify extreme error-avoidance trade-offs, without tacit probability judgments of rare, high-impact events; (b) how much superforecasting interventions can improve probability judgments of such events.     

Tournament Compensation Systems,Employee Heterogeneity,and Firm Performance

Tournament compensation systems are widely used in practice and have been extensively analyzed theoretically. However, one major problem has hardly been studied in a company context so far: Although it is theoretically well understood that tournament compensation systems are only effective when employees are homogeneous, it has rarely been analyzed what companies can do when they are confronted with employee heterogeneity. In our article, we derive hypotheses on the performance effects of tournament compensation systems in a context of employee heterogeneity based on tournament and expectancy theory. Using personnel records from incentive travel contests, we are able to show that performance is lower in a situation with employee heterogeneity, but that in heterogeneous tournaments, incentives may still work for a subgroup of employees whom we term the “threshold group.” In addition, we also show how companies manage to design the information disclosure systems necessary to install effective “handicapping” or “league‐building” systems in order to increase the effort‐performance expectancy.     

Making it work in free agent work: The coping practices of Swedish freelance journalists

Studies of post-industrial work have shown how workers are increasingly shouldering the risk of and the responsibility for social protection, work shortages, professional training, and securing a stream of continuous incoming work. This study of Swedish freelance journalists examines how these free agents cope with a situation whereby the need exists to actively bear the full responsibility for attracting and contracting, producing, and billing their work as journalists. The empirical material shows how freelancers engage in various coping practices to secure both sufficient amounts of work and the accompanying economic compensation. Freelancers who “make it work” are often those managing to embed themselves in long-standing relationships with clients and colleagues, thus ensuring a long-term work horizon and a steady income. Even so, the inherent “responsibilization” of contemporary work is amplified and intensified by the freelance work mode. This study makes two contributions: Firstly, it provides knowledge of free agent work in a Swedish context, a national setting that is often presumed to be a “role model” for good working conditions. Secondly, it highlights the specifics of managing work that entails a continuous stream of sequential and parallel assignments of limited duration and the ongoing “employment management work” this entails as regards making sure assignments keep “coming in”.     

What do forecasting rationales reveal about thinking patterns of top geopolitical forecasters?

Geopolitical forecasting tournaments have stimulated the development of methods for improving probability judgments of real-world events. But these innovations have focused on easier-to-quantify variables, like personnel selection, training, teaming, and crowd aggregation—bypassing messier constructs, like qualitative properties of forecasters’ rationales. Here, we adapt methods from natural language processing (NLP) and computational text analysis to identify distinctive reasoning strategies in the rationales of top forecasters, including: (a) cognitive styles, such as dialectical complexity, that gauge tolerance of clashing perspectives and efforts to blend them into coherent conclusions and (b) the use of comparison classes or base rates to inform forecasts. In addition to these core metrics, we explore metrics derived from the Linguistic Inquiry and Word Count (LIWC) program. Applying these tools to multiple tournaments and to forecasters of widely varying skill (from Mechanical Turkers to carefully culled “superforecasters”) revealed that: (a) top forecasters show higher dialectical complexity in their rationales and use more comparison classes; (b) experimental interventions, like training and teaming, that boost accuracy also influence NLP profiles of rationales, nudging them in a “superforecaster” direction.     

The Brexit can is kicked again – where do we go next?

? The UK and EU have agreed to kick the can further along the road, extending the Article 50 period to 31 October. But our analysis of the various political scenarios suggests that the chances of Parliament using the extra time to form a consensus are low, particularly if MPs believe that further extensions are possible. Should the EU make clear that it has run out of road along which to kick the can, Parliament will be forced to choose between the three options it has always had – in this situation we would still see an “orderly” Brexit as most likely, with a sizeable risk of “no deal” and a low probability on “no Brexit”.     

The analysis of risk perception with fuzzy means-end approach

Visitors’ risk perceptions have been found to influence the on-site behavior of tourists and their intention to return to a destination or to recommend it to others. This study discusses how the uses of a means-end approach with fuzzy conceptualization in eliciting the perception of tourism risks in a better understanding of the visitors’ perceptual orientation toward the tourism values. We provide a hierarchy value map that fuses the attribute–consequence–value (A–C–V) and fuzzy linguistics to effectively and efficiently understand vacation risks and risk characteristics. Fuzzy logic is also adopted to deal with the ill-defined nature of the tourist linguistic judgments required in the proposed means-end chain. This research findings suggest that additionally to managing the most likely risks, tourist resorts should be prepared to cope with worst case scenarios such as “Thunderstorm”, “Bus accident”, “Food poisoning” and “Cable car accident”. From an overall risk perceptive, tourists are most concerned with dominant perceptual orientation of risk delivers being “Bus accident” → “Decrease of trust in the safety management as a result of the event of damage” → “Anger”.     

Analysis of the cross-region risk contagion effect in stock market based on volatility spillover networks: Evidence from China

This article uses the stock market regional indexes of 31 provinces (include Province-level municipalities and Minority Autonomous Regions) in mainland China as a sample, and constructs an inter-regional volatility spillover network of China’s stock market based on the GARCH-BEKK model. Through network centrality analysis, Diebold and Yilmaz's spillover index method and block model analysis, we comprehensively analyze the risk contagion effect among different regions in China’s stock market. The empirical results show that: (i) The risk contagion intensity (risk reception intensity) in various regions of China’s stock market has a typical “core-periphery” distribution characteristic due to regions’ different levels of economic development. (ii) There are obvious risk spillover effect in China’s stock market, among which the economically developed regions along the southeastern coast of China, such as Beijing, Shanghai, Zhejiang and Jiangsu, are the main risk transmitters, while the economically undeveloped regions in the Midwest of China, such as Xinjiang, Xizang, Gansu, Nei Menggu and Qinghai are the main risk receivers. (iii) Each region is divided into 4 blocks according to their respective roles in the risk spillover process in China’s stock market. Block 1 that is composed of the economically underdeveloped regions in the Midwest is the “main benefit block”, it acts as a “receiver”. Block 2 that is composed of regions with strong economic growth vitality in the Midwest is a “Bilateral spillover block”, it both plays the role of “receiver” and “transmitter”. Block 3 that is composed of developed regions along the southeast coast, it acts as a “transmitter”; Block 4 that is composed of the relatively fast-growing regions in the Southwest is the “brokers block”, it serves as a “bridge”. The results of this article can provide some reference for investors in financial institutions and decision makers in financial regulators.     

Disappointment aversion in tournaments

Many experiments and field studies indicate that individuals have an asymmetric attitude towards gains versus losses. In this paper, we extend the canonic tournament model by assuming the workers' preferences exhibit disappointment aversion. First, we find the winning prize is first increasing and then decreasing in volatility and the losing prize shows the opposite. Furthermore, when the volatility exceeds a threshold, both the winning and losing prizes are reduced to zero. By contrast, there is no such kink for the risk aversion case. Finally, we find the piece rates always dominate rank-order tournaments when the workers are disappointment averse.     

The hidden costs of control revisited: Should a sanctioning policy be announced in advance?

Sanctions are widely used to enhance compliance in principal agent relationships. Although there is ample evidence confirming the predicted positive incentive effect of sanctions, it has also been shown that imposing sanctions may reduce compliance by crowding out intrinsic motivation. We add to the literature on the hidden costs of control by showing that these costs are restricted to situations where the principal actively chooses to sanction low performance and where this choice is known to the agent. In such a situation, the principal's commitment to sanction low performance might indicate that she or he is a distrustful “type” and hence conveys a negative signal. To the contrary, if (a) an agent is not informed about whether low performance will be sanctioned or if (b) the computer determines whether low performance will be sanctioned, the principal's “type” is not revealed, and we find no evidence of crowding out.     

The professional manager of the future

It's just possible that a businessman's role in the year 2000 will erode seriously due to little involvement in the growing “leisure values” of an affluent culture and failure to contribute directly to the needs of what will be a strongly post-industrial society. But if we want to train managers who are able to meet the needs and interests of the wider community, how do we prepare them for something as conceptual as “social responsibility”? Is it enough to superimpose on the business curriculum some courses in the social, political or technical-environmental forces affecting the individual and his firm, i.e. make the student study more and longer before he becomes an operative “professional”?     

The MNE investment location decision: Some empirical evidence

Factors governing MNE investment are typically divided into three groups-infrastructural variables, location-specific risk factors and government policy variables. The first objective of this paper is to assess the influence of these factors on MNE location decisions. The second objective is to test whether government participation in location tournaments (whereby local governments offer incentives to MNEs to influence their location decisions) is worthwhile. Arthur (1986,1990) points out that such participation is worthwhile if government policy has irreversible effects that persist after policy is withdrawn. In the estimation of the model, neither risk nor infrastructural factors are found to have a significant effect on the MNE investment location decision. However, there seems to be some evidence indicating that past investment decisions tend to have irreversible effects. Thus, government participation in location tournaments may be worthwhile.     

Downsizing outcomes: Better a victim than a survivor?

Is it better to be laid off when a downsizing initiative is announced? We analyze the outcomes experienced by both victims and survivors involved in a major downsizing program, and present a model of downsizing stress. Results indicate that displaced employees, or “victims,” who secure new employment fare better than survivors. The victims in our study perceive higher levels of control, less stress, and fewer negative job strains than continuing workers, or “survivors.” These results lend credence to suggestions that stress and control are critical factors in understanding employee reactions to downsizing. © 2003 Wiley Periodicals, Inc.     

Last in,first out?: Estimating the effect of seniority rules in Sweden

In this paper we investigate whether a relaxation in seniority rules (the “last-in-first-out” principle) had any effect on firms' employment behaviour. Seniority rules exist in several countries, but consequences of seniority rules on firms' employment behaviour have not been examined previously. The “last-in-first-out” principle in Sweden was reformed in January 2001 such that employers with ten or fewer employees were allowed to exempt two workers from the seniority rule. Using an employer–employee unbalanced panel data for the period 1996–2005, we find that both hires and separations increased in small firms relative to large firms by 5%. This also implies that there were no effects on firms' net employment. Our results show that firms reacted to changes in the seniority rules, but we argue that the effects are not overwhelmingly large.     

Relative deprivation in rank-order tournaments

This paper examines the influence of relative deprivation (RD), based on net income, on the strategy choice of workers in tournaments. The results show that for given tournament prizes, workers who experience RD exert more effort than workers who maximize their expected absolute incomes. These findings hold for productive effort as well as for counterproductive effort (sabotage). In addition, the paper discusses various implications that arise when the employer can choose between different compensation schemes in the tournament.     

I pledge thee my troth … contingently: commitment and the contingent work relationship

This paper examines work commitment outside of traditional and ongoing employer–employee relationships. In particular, attention is given to the commitment-related implications associated with the growth of various forms of “contingent” employment contracts. Of specific theoretical and practical concern is the applicability, overlap, and/or relative importance of various commitment foci (e.g., organization, job, occupation, and employment) for workers employed in both traditional arrangements and three illustrative forms of contingent employment. Implications for commitment theory, human resource management practices, and future research needs are discussed.     

Pervasive myths in leadership development: Unpacking constraints on leadership learning

Forty years ago, the questions most discussed among those who cared about leadership were “is leadership possible among those who don't have titles and positions?”; “what are the characteristics possessed by effective leaders?”; and “how do we find the people who are the best leaders and help them prepare for positions that will allow them to have an impact?” After many conversations, conferences, research studies, and books, the terrain has shifted among scholars. Now the conversations focus on questions such as “If leadership is a shared responsibility among members of groups, how can the full leadership potential of all be cultivated?”; “What role do collaborators play in empowering positive leadership and defending against those who misuse it?”; and “How can organizations cultivate cultures that support and encourage visionary leadership dedicated to benefitting all?” The shift in the questions that leadership educators now explore, coupled with the breadth and variety of the initiatives dedicated to nurturing it, demonstrate that leadership can be taught. More importantly, the practice of leadership demonstrates that many can pursue leadership and that they must if the opportunities of the 21st century are to be fulfilled. The conversations and the needs for leadership have both shifted and it is now incumbent on those who value leadership most to agree to unifying perspectives that can draw us together in common purpose. From your vantage point, what are the crucial conversations, next steps, and/or thoughts for consideration as we enter the second decade of the 21st century?     

Leadership learning: Crucial conversations,next steps,and thoughts for consideration

Forty years ago, the questions most discussed among those who cared about leadership were “is leadership possible among those who don't have titles and positions?”; “what are the characteristics possessed by effective leaders?”; and “how do we find the people who are the best leaders and help them prepare for positions that will allow them to have an impact?” After many conversations, conferences, research studies, and books, the terrain has shifted among scholars. Now the conversations focus on questions such as “If leadership is a shared responsibility among members of groups, how can the full leadership potential of all be cultivated?”; “What role do collaborators play in empowering positive leadership and defending against those who misuse it?”; and “How can organizations cultivate cultures that support and encourage visionary leadership dedicated to benefitting all?” The shift in the questions that leadership educators now explore, coupled with the breadth and variety of the initiatives dedicated to nurturing it, demonstrate that leadership can be taught. More importantly, the practice of leadership demonstrates that many can pursue leadership and that they must if the opportunities of the 21st century are to be fulfilled. The conversations and the needs for leadership have both shifted and it is now incumbent on those who value leadership most to agree to unifying perspectives that can draw us together in common purpose. From your vantage point, what are the crucial conversations, next steps, and/or thoughts for consideration as we enter the second decade of the 21st century?     

Leadership: A journey of sustained performance

Forty years ago, the questions most discussed among those who cared about leadership were “is leadership possible among those who don't have titles and positions?”; “what are the characteristics possessed by effective leaders?”; and “how do we find the people who are the best leaders and help them prepare for positions that will allow them to have an impact?” After many conversations, conferences, research studies, and books, the terrain has shifted among scholars. Now the conversations focus on questions such as “If leadership is a shared responsibility among members of groups, how can the full leadership potential of all be cultivated?”; “What role do collaborators play in empowering positive leadership and defending against those who misuse it?”; and “How can organizations cultivate cultures that support and encourage visionary leadership dedicated to benefitting all?” The shift in the questions that leadership educators now explore, coupled with the breadth and variety of the initiatives dedicated to nurturing it, demonstrate that leadership can be taught. More importantly, the practice of leadership demonstrates that many can pursue leadership and that they must if the opportunities of the 21st century are to be fulfilled. The conversations and the needs for leadership have both shifted and it is now incumbent on those who value leadership most to agree to unifying perspectives that can draw us together in common purpose. From your vantage point, what are the crucial conversations, next steps, and/or thoughts for consideration as we enter the second decade of the 21st century?