Download this Paper Open PDF in Browser

The Effect of Employee Stock Options on the Evolution of Compensation in the 1990s

18 Pages Posted: 21 Jun 2001  

Hamid Mehran

Independent

Joseph S. Tracy

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Abstract

Between 1995 and 1998, actual growth in compensation per hour (CPH) accelerated from approximately 2 percent to 5 percent. Yet as the labor market continued to tighten in 1999, CPH growth unexpectedly slowed. This article explores whether this aggregate wage puzzle can be explained by changes in the pay structure-specifically, by the increased use of employee stock options in the 1990s. The CPH measure captures these options on their exercise date, rather than on the date they are granted. By recalculating compensation per hour to reflect the options' value on the grant date, the authors find that the adjusted CPH measure accelerated in each year from 1995 to 1999.

Keywords: employee stock options, compensation per hour, labor markets

JEL Classification: G3, G10, J3, J33

Suggested Citation

Mehran, Hamid and Tracy, Joseph S., The Effect of Employee Stock Options on the Evolution of Compensation in the 1990s. Economic Policy Review, Vol. 7, No. 3, December 2001. Available at SSRN: https://ssrn.com/abstract=272482 or http://dx.doi.org/10.2139/ssrn.272482

Hamid Mehran

Independent ( email )

No Address Available

Joseph Tracy (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6344 (Phone)
212-720-2630 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
465
Rank
49,889
Abstract Views
2,761