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Gender and Dynamic Agency: Theory and Evidence on the Compensation of Female Top Executives

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Author Info

  • Stefania Albanesi

    ()
    (Columbia University and NBER)

  • Claudia Olivetti

    ()
    (Boston University, Department of Economics)

Abstract

Survey and experimental evidence point to the existence of a pervasive set of culturally-related barriers. These include lack of mentoring and role models, exclusion from informal networks, gender based stereotyping, display of style different than the organizational norms, difficulties in engaging in negotiations and inhospitable corporate culture. Based on this evidence, we consider two alternative hypotheses regarding possible determinants of gender differences in the structure of compensation. The first hypothesis is that female executives have lower impact. Specifically, we allow for a lower effect of effort on the probability of high profits for female executives (probability-impact). Alternatively, we consider the case where for given effort, female executives give rise to higher volatility in firm profits (productivity-impact). The second hypothesis is that female executives have lower effectiveness - that is, they have a smaller role in the determination of a firm's profits, for a given impact of their effort. We find that the version of the model in which female executives have lower effectiveness is consistent with the observed gender differences in the structure of executive compensation. The version with lower impact fails to replicate, among the other things, the lower fraction of performance pay earned by female executives.

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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2006-061.

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Length: 23pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:bos:wpaper:wp2006-061

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References

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  1. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers 88-04, Rochester, Business - Managerial Economics Research Center.
  2. Wang, Cheng, 1997. "Incentives, CEO Compensation, and Shareholder Wealth in a Dynamic Agency Model," Journal of Economic Theory, Elsevier, vol. 76(1), pages 72-105, September.
  3. Marianne Bertrand & Kevin F. Hallock, 2001. "The Gender gap in top corporate jobs," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 3-21, October.
  4. Kevin J. Murphy, 1986. "Incentives, Learning, and Compensation: A Theoretical and Empirical Investigation of Managerial Labor Contracts," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 59-76, Spring.
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Cited by:
  1. Stefania Albanesi & Claudia Olivetti, 2009. "Production, Market Production and the Gender Wage Gap: Incentives and Expectations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 80-107, January.
  2. Bredemeier, Christian & Juessen, Falko, 2009. "Household Labor Supply and Home Services in a General-Equilibrium Model with Heterogeneous Agents," IZA Discussion Papers 3944, Institute for the Study of Labor (IZA).
  3. Hanno Lustig, . "The Wealth-Consumption Ratio: A Litmus Test for Consumption-based Asset Pricing Models," UCLA Economics Online Papers 420, UCLA Department of Economics.
  4. George-Levi Gayle & Limor Golan & Robert Miller, . "Are There Glass Ceilings for Female Executives?," GSIA Working Papers -1969975920, Carnegie Mellon University, Tepper School of Business.
  5. Lalanne, Marie & Seabright, Paul, 2011. "The Old Boy Network: Gender Differences in the Impact of Social Networks on Remuneration in Top Executive Jobs," IDEI Working Papers 689, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Stefania Albanesi & Claudia Olivetti, 2009. "Gender Roles and Medical Progress," NBER Working Papers 14873, National Bureau of Economic Research, Inc.

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