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Local Labor Market Conditions and Stock Options Incidence: A Study of the Information Technology Sector

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Author Info
Benjamin Campbell (University of California, Berkeley)
Abstract

This article focuses on .rms' use of stock options to reduce exposure to labor market pressure during industry booms. If .rm stock price is positively related to industry growth and industry growth is positively related to compensation at alternative employers, then stock options can be used to index total employee compensation without increasing wages. The empirical analysis, based on a proprietary survey of information technology (IT)p rofessionals, demonstrates that stock option incidence in the IT sector is positively correlated with regional labor market sensitivity to industry shocks. I conclude that stock options are implemented in a manner consistent with the reduction of labor market pressure.

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Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number 1094.

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Date of creation: 19 Jun 2003
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Handle: RePEc:cdl:indrel:1094

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Keywords: Labor Market Institutions; Information Technology;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Yermack, David, 1995. "Do corporations award CEO stock options effectively?," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 237-269. [Downloadable!] (restricted)
  2. Paul Oyer, 2004. "Why Do Firms Use Incentives That Have No Incentive Effects?," Journal of Finance, American Finance Association, vol. 59(4), pages 1619-1650, 08. [Downloadable!] (restricted)
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  3. James C. Sesil & Maya K. Kroumova & Joseph R. Blasi & Douglas L. Kruse, 2002. "Broad-based Employee Stock Options in US 'New Economy' Firms," British Journal of Industrial Relations, Blackwell Publishers Ltd/London School of Economics, vol. 40(2), pages 273-294, 06. [Downloadable!] (restricted)
  4. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-64, April. [Downloadable!] (restricted)
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  5. Kruse, Douglas L, 1992. "Profit Sharing and Productivity: Microeconomic Evidence from the United States," Economic Journal, Royal Economic Society, vol. 102(410), pages 24-36, January. [Downloadable!] (restricted)
  6. Nellie Liang & Scott Weisbenner, 2001. "Who benefits from a bull market? an analysis of employee stock option grants and stock prices," Finance and Economics Discussion Series 2001-57, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  1. Benjamin Campbell, 2003. "Firm Volatility and Stock Option Incidence," Institute for Research on Labor and Employment, Working Paper Series 1093, Institute of Industrial Relations, UC Berkeley. [Downloadable!]
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