Personnel Economics: Strengths, Weaknesses and Its Place in Human Resource Management**

By Dilger, Alexander | Management Revue, October 1, 2011 | Go to article overview

Personnel Economics: Strengths, Weaknesses and Its Place in Human Resource Management**


Dilger, Alexander, Management Revue


Personnel economics is a rather young academic (sub-)discipline that applies (micro)economic methodology and insights to the personnel function of companies. It is scientifically fertile and complementary to other disciplinary approaches to personnel issues. Instead of that, an approach without a grounding discipline seems dubious and a self-contained personnel science does not exist.

Key words: discipline, economics, HRM, human resource management, labour economics, personnel economics

(JEL: A12, B40, J00M10, M12, M20, M50)

1. Introduction

Personnel economics is a quite young sub-discipline of human resource management (HRM). HRM will be used in the following as a neutral generic term including all subdisciplines and academic approaches concerning human resources. Since its establishment in the 1990s, personnel economics has strongly developed internationally as well as in German-speaking countries. Wunderer and Mittmann (1983) found only economic trace elements in HRM publications. Sadowski et al. (1994) already saw an economic silver lining at the horizon. Weibler and WaId (2004) complained about economic hegemony in HRM, although there are much less personnel economists than other HRM researchers even though their share is increasing.

In the next section, the meaning of personnel economics is explained. The third section outlines the strengths of personnel economics and the fourth section its weaknesses, both from the author's personal point of view (and confined to Germanspeaking countries). The same holds for explanations concerning the relationship between personnel economics and other sub -disciplines of HRM in section five. One important distinction is made between approaches founded in other established disciplines like psychology or law, which seem equally valid as personnel economics, and those without such a foundation. Section six concludes.

2. The meaning of personnel economics

Personnel economics is a fusion of the much older economic sub -discipline labour economics and HRM, which is also an older part of management studies or business administration. In personnel economics, microeconomic methods are used to analyse human resources, especially, but not only, from a firm's point of view. Besides methods and insights of microeconomics in a narrow, neoclassical way, personnel economists make use of human capital theory, new institutional economics and econometrics in order to analyse the business function of personnel in general and the relationship between employers and employees in particular. However, a reduction of personnel economics to no more than three concepts of new institutional economics, namely principal-agent theory, transaction costs economics and property rights theory (cf. Ridder, 2009, pp. 60-73), is too narrow and not justified. In principle, any economic and econometric theory and method can be used to generate positive as well as normative knowledge about human resources.

Personnel economics was founded in the 1990s by Edward P. Lazear. Most relevant in this regard is his textbook "Personnel Economics" from 1995 (Lazear, 1995). Already in 1993 he wrote about "The New Economics of Personnel" (Lazear, 1993). In 1998 his most important textbook, "Personnel Economics for Managers", was published (Lazear, 1998; there are two volumes in German, Wolff and Lazear, 2001, and Backes-Gellner et al., 2001). In the same year Lazear gave the Presidential Address to the Society of Labor Economists about "Personnel Economics: Past Lessons and Future Directions" (Lazear, 1999). Therein he discussed mainly his own work from the previous two decades, but also confessed (p. 201): "Actually, the work in personnel economics goes back much further. The earliest mention in relatively modern literature is found in Slichter (1928)."

Bruno Staffelbach seems (according to Google Scholar) to be the first author who used the German term "Personalökonomik" (Staffelbach, 1994), insofar as Lazear's meaning of the term is concerned, whereas Franz Oppenheimer (1928, p. …

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