Abstract

http://ssrn.com/abstract=1354531
 
 

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Technological Change and the Growing Inequality in Managerial Compensation


Hanno N. Lustig


UCLA - Anderson School of Management; National Bureau of Economic Research (NBER)

Chad Syverson


University of Chicago Booth School of Business; National Bureau of Economic Research (NBER)

Stijn Van Nieuwerburgh


New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

August 7, 2010

NYU Working Paper No. FIN-08-044

Abstract:     
Three of the most fundamental changes in US corporations since the early 1970s have been (1) the increased importance of organizational capital in production, (2) the increase in managerial income inequality and pay-performance sensitivity, and (3) the secular decrease in labor market reallocation. Our paper develops a simple explanation for these changes: A shift in the composition of productivity growth away from vintage-specific to general growth. This shift has stimulated the accumulation of organizational capital in existing firms and reduced the need for reallocating workers to new firms. We characterize the optimal managerial compensation contract when firms accumulate organizational capital but risk-averse managers cannot commit to staying with the firm. A calibrated version of the model reproduces the increase in managerial compensation inequality and the increased sensitivity of pay to performance in the data over the last three decades.

Number of Pages in PDF File: 45

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Date posted: March 9, 2009 ; Last revised: August 10, 2010

Suggested Citation

Lustig, Hanno N. and Syverson, Chad and Van Nieuwerburgh, Stijn, Technological Change and the Growing Inequality in Managerial Compensation (August 7, 2010). NYU Working Paper No. FIN-08-044. Available at SSRN: http://ssrn.com/abstract=1354531

Contact Information

Hanno N. Lustig
UCLA - Anderson School of Management ( email )
405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Chad Syverson
University of Chicago Booth School of Business ( email )
1126 East 59th Street
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Stijn Van Nieuwerburgh (Contact Author)
New York University Stern School of Business, Department of Finance ( email )
44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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