Personnel economics
Personnel economics has been defined as "the application of economic and mathematical approaches and econometric and statistical methods to traditional questions in human resources management".[1] It is an area of applied micro labor economics, but there are a few key distinctions. One distinction, not always clearcut, is that studies in personnel economics deal with the personnel management within firms, and thus internal labor markets, while those in labor economics deal with labor markets as such, whether external or internal.[2] In addition, personnel economics deals with issues related to both managerial-supervisory and non-supervisory workers.[3]
The subject has been described as significant and different from sociological and psychological approaches to the study of organizational behavior and human resource management in various ways. It analyzes labor use, which accounts for the largest part of production costs for most firms, by formulation of relatively simple but generalizable and testable relationships. It also situates analysis in the context of market equilibrium, rational maximizing behavior, and economic efficiency, which may be used for prescriptive purposes as to improving performance of the firm.[4] For example, an alternate compensation package that provided a risk-free benefit might elicit more work effort, consistent with psychologically-oriented prospect theory.[5] But a personnel-economics analysis in its efficiency aspect would evaluate the package as to cost–benefit analysis, rather than work-effort benefits alone.[6]
Personnel economics has its own Journal of Economic Literature classification code, JEL: M5 but overlaps with such labor economics subcategories as JEL: J2, J3, J4, and J5.[7] Subjects treated (with footnoted examples below) include:
History of Personnel Economics[edit]
The field can be traced back to 1776 when Adam Smith, a British economist, suggested that within the labor market equilibrium, a trade-off between a worker's wages and non-monetary working conditions could exist.[14] However, Personnel Economics did not gain prominence until 1987, when the Journal of Labor Economics published 10 articles on the field.[14] During the 1990s, Personnel Economics gradually became more empirical-based, whereas previously the field was more heavily theoretical.[15] Personnel Economics is now considered a branch of Labor Economics. In 1998, Edward Lazear described it as "the use of economics to understand the internal workings of the firm."[15] With the availability of new data, the field has evolved to have more practical use. Econometric techniques have played a significant role in the field's development, with data being used to analyze personnel records and other human resource data. This is known as Insider Econometrics.[16]