040263 KU Personnel Economics II (MA) (2025W)

This class investigates the determinants of workforce size and structure and personnel management’s tools to affect or economize on this structure. It begins by clarifying both what parties in the employment relationship expect from contracting and the problem that arises if some or all the respective information is private. Subsequently, we focus on (self-)selection, ability signaling and screening, and discuss the baseline model of recruiting. We will also look at the outcomes of a real-world recruitment process involving an assessment center and the possibilities to analyze such data. Since firms compete for employees in the labor market, the class will then investigate the options of HR management to “immunize” their own workforce from such inter-firm competition. Lastly, we discuss whether the benefits and pitfalls of creating a competitive workplace environment within the firm.
Specifically, the course is developed along the following structure:

Chapter 1: Introduction
a) What makes a (good) job? Attributes and Uncertainties
b) What do employees want? Fringes and Work from Home (WFH)
c) The baseline model with bilateral informational asymmetries
d) What do employers want? The future of jobs

Chapter 2: Asymmetric Information – Self-selection, signaling, screening, and recruiting
a) The “Market for Lemons“ model and applications to “Gig“-labor
b) Signaling, including remarks on statistical discrimination
c) Screening: recruiting and testing
d) Recruitment consulting: a case study from Austria

Chapter 3: Competition between and within firms
a) Retention and bonding
b) Lifetime contracts: salary and pensions as incentive devices
c) Competition among employees: relative pay and promotion tournaments
d) The “dark side“ of internal competition: sabotage, collusion and “glass ceilings”

The subdirectory “For further information and interest” (on Moodle) contains articles and reports which either inform about the original work on which lecture content is based or provide material which reaches beyond the lecture content for students who wish to pursue their own research in this area.