Wealth Inequality and CEO Compensation

22 Pages Posted: 28 Apr 2015

See all articles by Calvin Blackwell

Calvin Blackwell

College of Charleston - School of Business

Rachel Graefe-Anderson

University of Mary Washington

Frank L Hefner

College of Charleston - Department of Economics

Dyanne Vaught

College of Charleston

Date Written: April 27, 2015

Abstract

Over the past twenty years there has been a dramatic increase in both CEO pay and the wealth of the richest Americans. We examine three hypotheses regarding the relationship between wealth inequality and CEO compensation: first, that the increase in CEO income inequality helped cause increased wealth inequality; second, that increases in wealth inequality helped cause increased CEO income inequality; and third, that both types of inequality are caused by a third factor. We test these hypotheses by using ExecuComp and Forbes 400 data to estimate power law distributions and compare the behavior of these distributions over time. We find no support for any of the three hypotheses.

Keywords: Inequality, CEO compensation, Power law distribution, Pareto distribution

JEL Classification: D31, J30

Suggested Citation

Blackwell, Calvin and Graefe-Anderson, Rachel and Hefner, Frank L and Vaught, Dyanne, Wealth Inequality and CEO Compensation (April 27, 2015). Available at SSRN: https://ssrn.com/abstract=2599740 or http://dx.doi.org/10.2139/ssrn.2599740

Calvin Blackwell (Contact Author)

College of Charleston - School of Business ( email )

Department of Economics
66 George Street
Charleston, SC 29424
United States
843-953-7836 (Phone)
843-953-5697 (Fax)

Rachel Graefe-Anderson

University of Mary Washington ( email )

1301 College Avenue
Fredericksburg, VA 22401
United States

Frank L Hefner

College of Charleston - Department of Economics ( email )

5 Liberty Street
Charleston, SC 29401
United States
+1 843 953 8111 (Phone)

Dyanne Vaught

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

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