The Effects of Human Resource Management on workers' wages and firms' productivity

We analyze whether the effects of human resource practices on workers’ wages and firm productivity are similar or different. We find that firms’ wage policies overestimate the relevance of sector-specific skills and underestimate the productivity enhancing effect of computer skills. Moreover, only the firm benefits from performance related pay, whereas only the workers benefit from performance evaluation interviews. Finally, our estimation results show that in small firms a more advanced HRM system may not result in a convergence of interests between workers and the firm.