Faculty & Research

Michael Gibbs

Clinical Professor of Economics; Faculty Director of the Executive MBA Program

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5807 South Woodlawn Avenue
Chicago, IL 60637

Michael Gibbs studies the economics of human resources and organizational design. He is co-author (with Edward Lazear) of the leading textbook in his field, Personnel Economics in Practice. The 3rd edition was published in 2014; Chinese and Japanese translations are forthcoming. Gibbs's research has been published in the Quarterly Journal of Economics, Industrial & Labor Relations Review, Accounting Review, and other journals. Professor Gibbs is a Research Fellow of the Center for the Study of Labor (IZA), the Institute for Compensation Studies, and is on the board of Huy Vietnam. From 2012-2015, Gibbs was Faculty Director of Booth’s Executive MBA program.

In 2007 Gibbs received the Notable Contribution to Management Accounting Literature from the American Accounting Association. He has received two Hillel Einhorn Excellence in Teaching Awards.

Gibbs earned an AB, AM and PhD in economics all from the University of Chicago.


2015 - 2016 Course Schedule

Number Name Quarter
33032 Managing the Workplace 2016 (Winter)
33801 Microeconomics 2016 (Summer)
33832 Organizations and Incentives 2016 (Winter)

Other Interests

Food, travel, computers.


Research Activities

Personnel economics.

“Design & Implementation of Pay for Performance,” Oxford Handbook of Managerial Economics (2013).

With A. Levenson & C. Zoghi, “Why are Jobs Designed the Way They Are?,” Research in Labor Economics (2010).

With K. Merchant, W. Van der Stede & M. Vargus, “Performance Measure Properties and Incentive Plan Design,” Industrial Relations (2009).

With W. Hendricks, “Do Formal Salary Systems Really Matter?” Industrial & Labor Relations Review (2004).

With K. Merchant, W. Van der Stede & M. Vargus, “Determinants and Effects of Subjectivity in Incentives,” The Accounting Review (2004).

With G. Baker & B. Holmstrom, “The Internal Economics of the Firm: Evidence from Personnel Data,” Quarterly Journal of Economics (1994).

With G. Baker & B. Holmstrom, “The Wage Policy of a Firm,” Quarterly Journal of Economics (1994).

For a listing of research publications please visit ’s university library listing page.

REVISION: Is Kenya's Digital Revolution Informalising Financial Inclusion?
Date Posted: Sep  26, 2015
This paper uses FinAccess data to provide an alternative accounting of mobile money’s contribution to formal financial inclusion and explores how this powerful new financial tool enables informal as well as formal financial action. The paper argues that the access strand framework employed in Kenya’s financial inclusion reporting places too much emphasis on a supply-side perspective which concentrates on institutional formality, rather than the underlying behaviours and functions which financial products enable. In the development lexicon, it is the latter which are of interest, rather than the former. Financial sector development initiatives rest on the understanding that financial tools can improve the capacity individuals and institutions to manage liquidity, invest productively, pool risk effectively and transact efficiently, with consequent impacts on livelihoods and growth. For households (and to an extent businesses) these benefits can be delivered through informal as well as ...

REVISION: Embedded in Fraud: Social Capital as an Exploitable Resource
Date Posted: Sep  26, 2015
This paper demonstrates that trust derived from group-based social capital is an exploitable resource available to corrupt agents for enacting fraud. In the context of a large, impersonal market, principals are more likely to choose an agent based on shared social identity, especially when they live in environments where their social group is threatened. But in contrast to most social scientific work on group-based trust, a corrupt agent is also more likely to victimize socially similar clients, especially when clients live in the threatening environments that stimulate their use of social capital initially. Further analysis supports the conclusion that victims belonging to the corrupt agent’s social group are less likely to monitor and enforce trustworthy behavior. The empirical setting is the ethnically diverse and contentious population of investors in Kenya’s emerging stock market, where the country’s largest stockbroker was found to have defrauded more than 20,000 investors in a ...

REVISION: Mobilizing a Market: Ethnic Segregation and New Investor Recruitment into Kenya's Nairobi Securities Exchange
Date Posted: Aug  05, 2015
This study examines how actors from diverse and competing social groups can come to identify as members of a common market rather than as agents of their discrete social groups. Using data on new-investor recruitment into Kenya’s nascent capital market, the Nairobi Securities Exchange, from 2005 through 2008, I identified mechanisms driving social segmentation as well as integration of disparate groups. The empirical context is characterized by weak formal institutions and high levels of inter-ethnic distrust, a novel but productive setting for studying how potential adopters use social identities to resolve uncertainty around expected gains of participating in a new market. Results show that instead of exhibiting blanket influence by homophilous peers, potential investors were positively influenced by profits earned by proximate coethnic peers primarily when their own exposure to corrupt financial organizations was higher but were negatively influenced by the profits of ethnic ...

REVISION: Distrust and Stock Market Participation: Social Similarity as a Moderator of Reactions to Fraud
Date Posted: Aug  05, 2015
This paper extends earlier work on organizational stigma by studying the moderating role of social similarity between fraud-affected investors and their corrupt agent on future investment behaviors. The empirical setting is the ethnically diverse and contentious population of investors in Kenya’s Nairobi Securities Exchange (NSE), where the country’s largest stockbroker was expelled from the market in 2008 after defrauding one-quarter of its 100,000 clients and electronic records measure the ethnic identities and investment behaviors of both victimized and non-victimized investors. Theory and empirics focus on the extent to which coethnic versus non-coethnic clients and victims of the corrupt broker differ in their selection of a new intermediary and willingness to reinvest. Unsurprisingly, clients of the corrupt broker are less likely to reinvest subsequent to the fraud, but clients who are coethnic to the corrupt broker react less negatively than non-coethnics. Non-coethnic clients ...

REVISION: The Financialization of Everyday Life: Mobile Money and (In)Formal Activity in a Developing Context
Date Posted: Feb  12, 2015
This paper contributes to the literature on the financialization of everyday life by studying the relationship between mobile money products and financialized practices in Kenya. We first outline a theoretical approach to studying financialization in developing countries that is consistent with research in developed countries but accommodates the differing motivations and operationalizations of financialized practices in the Global South. In part, this is accomplished by drawing explicit parallels to research on formal financial sector inclusion in developing countries. We extend research by considering how mobile money products may facilitate shifts toward financialized behaviors for individuals in the informal sector. Using nationally representative cross-sectional survey data measuring all financial products and practices used by 13,000 Kenyans, we find that mobile money use is positively related to increased inclusion in the formal financial sector, and formal sector inclusion is ...

New: Speculation as a Learned Behavior? Adaptive Rationality Among New Investors and the Evolution of a Nascent Market
Date Posted: Feb  11, 2015
This inductive study examines the extent to which small, newly recruited investors learn to mimic the trading behaviors of experienced institutional investors in an emerging capital market characterized by policies that incentivize speculative trading in IPO shares. Theoretically, I explore how small, inexperienced investors learn to trade shares more effectively and how the ordering and attributes of listing firms facilitate or impede this learning process. Empirically, I model rates of speculative IPO trading for investors based on portfolio value, registration type (individual vs. company), and previous experience in the Kenyan IPO market and chart the relative rates of speculative trading between investor groups over the course of successive IPOs. Analysis of individual data for 1.4 million domestic investors across six consecutive IPOs in Kenya’s nascent stock market from 2006 to 2008 suggests that low portfolio value individual investors are initially much less likely than ...