Lecture 11 - ECOS3008 LABOUR ECONOMICS Week 14 07 June 1...

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1 ECOS3008 LABOUR ECONOMICS Week 14: 07 June
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2 Topic 4(iii): Personnel Economics Ch 9, major new chapter in R&W Lazear (2001) paper is the classic Newest branch of labour economics Application of microeconomic principles to human resources issues Directed at the way businesses manage their internal labour forces
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3 Personnel Economics Focus is on issues such as: Do wages relate to the worker’s characteristics or to the business’ attributes? Why are executives paid so highly? Greater emphasis on non-monetary pay? Greater emphasis on incentive-based pay than a fixed hourly wage?
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4 Personnel Economics Provides greater rigour to the analysis of internal labour markets Workers and organisations are assumed to be rational maximising agents. Applies constrained maximisation techniques Takes into account directly factors such as imperfect information, transaction costs,
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5 Personnel Economics Takes into account directly factors such as imperfect information, transaction costs, Assumes decisions are based on direct interaction between employer and employee, Less on external factors such as market demand and supply
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6 Personnel Economics – equilibrium this differentiates it from non-economics forms of human resource analysis Takes into account anticipated reactions of other side Overtones of game theory and strategic behaviour
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7 Personnel Economics – efficiency Utility maximising employees Profit maximising employers Ensures that efficiency gains are achieved Quality .v. quantity personnel economics focus on quality of work effort rather than quantity (c.f. labour supply focuses on hours of work, i.e.
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