The Effect of Labor Market Demand on U.S. CEO Pay Since 1980

Financial Review, Forthcoming

27 Pages Posted: 20 Feb 2008 Last revised: 26 Aug 2009

Multiple version iconThere are 2 versions of this paper

Date Written: August 19, 2009

Abstract

This paper shows that the rise in U.S. CEO pay from 1980 to 2003 is only partially explained by competition for profit-producing talent in the labor market. This conclusion is obtained by removing unintended data biases from tests of the only theoretical model in the literature that relates labor market competition (measured by large firm size) to CEO pay level. When the biases are removed or minimized, no more than 33% of the 600 percent rise in large firm CEO pay since 1980 is explained by a corresponding increase in large firm size.

Keywords: Executive compensation, CEO wages, labor market demand, extreme value theory, superstars.

JEL Classification: D2, D3, G34, J3

Suggested Citation

Nagel, Gregory Leo, The Effect of Labor Market Demand on U.S. CEO Pay Since 1980 (August 19, 2009). Financial Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1095690 or http://dx.doi.org/10.2139/ssrn.1095690

Gregory Leo Nagel (Contact Author)

Middle Tennessee State University ( email )

P.O. Box 50
Murfreesboro, TN 37132
United States

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