Up for Review: Unravelling the Link between Formal Evaluations and Performance‐Based Rewards

We study whether organizations that reward individual performance should give autonomy or should control how managers evaluate their subordinates. The normal way to establish control is to formalize the evaluations, so that managers cannot choose when and how to evaluate. We argue that organizations face a trade‐off because formalization helps reduce biases but also introduces rigidities. Using linked employer–employee data, we study the link between formal performance appraisals and firm financial performance.     

Technology education in preschool: providing opportunities for children to use artifacts and to create

In recent years, technology has been emphasized as an important area in early childhood curricula; however, in many countries preschool does not have the tradition of teaching specific subjects, and research shows that many preschool staff members are unsure about what teaching technology should include and how it should be taught. Therefore, with the ambition of outlining recommendations for both preschool practice and the preschool-teacher program, we investigated what elements staff members include in educating preschool children in technology. We investigated the research question What do preschool staff members include as elements of technology education in preschool? through open-ended items on a questionnaire completed by 102 preschool teachers and daycare attendants in Sweden. The answers were analyzed inductively, resulting in a set of seven categories: Artifacts and systems in children’s environments, Create, Problem solving, The concept of technology, Experiments, Techniques/Motor skills, and Natural science. Some key results emerged. First, artifacts have a central place in preschool technology education, and at least three verbs relate to how these artifacts are addressed: use, create, and understand. Second, the content of technology education in government regulatory documents is described to varying extents by the participants, and sometimes not at all. Third, expected elements like play and the important role of the staff are not expressed in the answers. Possible explanations and implications for the results are discussed.     

Working time, employment, and work sharing: Evidence from Sweden

We study three questions which are important for work sharing to increase employment. First, is there a negative long-run relation between working time and employment? Second, are hours per worker exogenous with respect to wages and employment? Third, can policy makers influence actual hours per worker? We formulate a theoretical model for employment, hours per worker, production, and real wages. A VAR model with cointegrating constraints is estimated by maximum likelihood using Swedish private sector data 1970:1–1990:4. We find (i) no long-run relation between hours per worker and employment, (ii) that hours per worker are endogenous with respect to the estimation of long-run parameters, and (iii) that legislated working time and hours per worker are related to each other in the long run. First version received: September 1997/final version accepted: June 1999     

Short‐Term Expectations in Listed Firms: The Effects Of Different Owner Types

We report empirical evidence in line with the disciplining role of different institutional and other owner types in reducing managerial myopia. Using data from a large Nordic survey, we find that companies, to a reasonably high degree, feel that external pressure for a good result in the short‐term generates conflict with the company's long‐term goals. We test for the effect of different ownership types and find that especially in firms with a large and non‐transitory activist or fund as an owner, the perceived pressure for short‐term actions is reduced. In addition, we observe a negative association between firm profitability and short‐term pressure, and we find that younger managers feel significantly more pressure. Firms subject to greater pressure engage in more actions to accommodate that pressure. Again, the impact of a large activist owner is especially beneficial because such firms significantly less often undertake actions that have the potential to destroy value, such as deprioritizing their long‐term investments or R&D.     

Dynamic coordination with timing frictions: Theory and applications

We present a general framework of dynamic coordination with timing frictions. A continuum of agents receive random chances to choose between two actions and remain locked in the selected action until their next opportunity to reoptimize. The instantaneous utility from each action depends on an exogenous fundamental that moves stochastically and on the mass of agents currently playing each action. Agents' decisions are strategic complements and history matters. We review some key theoretical results and show a general method to solve the social planner's problem. We then review applications of this framework to different economic problems: network externalities, statistical discrimination, and business cycles. The positive implications of these models are very similar, but the social planner's solution points to very different results for efficiency in each case. Last, we review extensions of the framework that allow for endogenous hazard rates and ex ante heterogeneous agents.     

Corporate credit risk modeling and the macroeconomy

Despite a surge in the research efforts put into modeling credit and default risk during the past decade, few studies have incorporated the impact that macroeconomic conditions have on business defaults. In this paper, we estimate a duration model to explain the survival time to default for borrowers in the business loan portfolio of a major Swedish bank over the period 1994–2000. The model takes both firm-specific characteristics, such as accounting ratios and payment behaviour, loan-related information, and the prevailing macroeconomic conditions into account. The output gap, the yield curve and consumers’ expectations of future economic development have significant explanatory power for the default risk of firms. We also compare our model with a frequently used model of firm default risk that conditions only on firm-specific information. The comparison shows that while the latter model can make a reasonably accurate ranking of firms’ according to default risk, our model, by taking macro conditions into account, is also able to account for the absolute level of risk.     

Increased sorting and wage inequality in the Czech Republic

This paper makes use of a linked employer–employee dataset to examine the evolution of wage inequality in the Czech Republic during 1998–2006. We find evidence of slightly increasing returns to human capital and diminishing gender inequality and document sharp increases in both within‐firm and between‐firm inequality. We investigate several hypotheses to explain these patterns: increased domestic and international competition, decentralized wage bargaining, skill‐biased technological change and a changing educational composition of the workforce. Domestic competition is found to lower within‐firm inequality whereas we find no evidence that increased international trade at the industry level is associated with higher between‐ or within‐firm wage inequality. The key factors driving the observed increase in wage inequality are increased educational sorting and the inflow of foreign firms to the Czech Republic.     

Feedback and incentives: Experimental evidence

This paper experimentally investigates the impact of different pay schemes and relative performance feedback policies on employee effort. We explore three feedback rules: no feedback on relative performance, feedback given halfway through the production period, and continuously updated feedback. We use two pay schemes, a piece rate and a tournament. We find that overall feedback does not improve performance. In contrast to the piece-rate pay scheme there is some evidence of positive peer effects in tournaments since the underdogs almost never quit the competition even when lagging significantly behind, and front runners do not slack off. But in both pay schemes relative performance feedback reduces the quality of the low performers' work; we refer to this as a “negative quality peer effect”.     

Declining Returns to Education in Norway? Comparing Estimates across Cohorts,Sectors and over Time

We examine the role of the Norwegian education system in explaining the moderate and stable earnings dispersion in Norway. Estimating earnings equations for 1980 and 1990, we find that returns to education have been remarkably stable in Norway, also when we compare returns to education across different sectors of the economy. Our analysis controls for self-selection into education by using an instrumental variable technique. We estimate separate education earnings profiles for different cohorts to identify the effect on wage premiums of the large changes that have taken place in the Norwegian education system. The substantially higher level of educational attainment for more recent cohorts does not, cet. par. , seem to have a negative effect on educational wage premiums for these younger cohorts.
JEL classification: J 24, J 31, I