Chapter 20: Personnel Economics: Hiring and Incentives

Personnel Economics is the study of the employment relationship. It is unlike most other fields of labor economics for two reasons. First, Personnel Economics has grown up largely within leading business schools, not economics departments. This has given the field a more normative orientation than what is typically found in economics. Because many researchers in this field must take their insights into MBA classrooms and offer advice to future managers, Personnel Economists are typically interested in how firms can solve human resource management problems and how the solutions to HR problems are related to firms’ broader strategic contexts. Second, Personnel Economics is notable in that it is shared between the fields of Labor Economics and Organizational Economics. Because of this, Personnel Economists typically do not treat a firm as a mere “black box” production function. The field is instead interested in understanding and explaining the wide array of human resource management choices made by firms.