Published: Oct 2007

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JEL Reference: D82, J24, L21

Working Paper

Information and Human Capital Management

An increasingly important organisational design problem for many firms is to recoup general human capital rents while maintaining attractive career prospects for workers. We explore the role of information management in this context. In our model, an information management policy determines the statistic of worker performance that will be available to outside recruiters. Choosing different statistics affects the extent of regression to the mean which, we show, in turn affects the incidence of adverse selection among retained and released workers. Using this observation, we detail how optimal information management policies vary across firms with different human capital management priorities. This view of human capital management via information management has strong implications for labour market outcomes. We discuss the impact on average wages, wage inequality, wage skewness and labour turnover rates.

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Keywords: Human Capital, Information Disclosure, Regression to the Mean, Adverse Selection, Turnover, Wage Distribution, Human Resource Management