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

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  • Campbell, Benjamin A.
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    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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    File URL: http://www.escholarship.org/uc/item/7266d0q3.pdf;origin=repeccitec
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    Bibliographic Info

    Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt7266d0q3.

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    Date of creation: 19 Jun 2003
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    Handle: RePEc:cdl:indrel:qt7266d0q3

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    Keywords: Labor Market Institutions; Information Technology;

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    1. 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.
    2. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers 88-04, Rochester, Business - Managerial Economics Research Center.
    3. Robert E. Hall & David M. Lilien, 1978. "Efficient Wage Bargains Under Uncertain Supply and Demand," NBER Working Papers 0306, National Bureau of Economic Research, Inc.
    4. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
    5. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Really Paid Like Bureaucrats?," NBER Working Papers 6213, National Bureau of Economic Research, Inc.
    6. Hashimoto, Masanori, 1979. "Bonus Payments, on-the-Job Training, and Lifetime Employment in Japan," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1086-1104, October.
    7. Blakemore, Arthur E & Low, Stuart A & Ormiston, Michael B, 1987. "Employment Bonuses and Labor Turnover," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S124-35, October.
    8. Blanchard, Olivier Jean, 1979. "Wage Indexing Rules and the Behavior of the Economy," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 798-815, August.
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    Cited by:
    1. Campbell, Benjamin A., 2003. "Firm Volatility and Stock Option Incidence," Institute for Research on Labor and Employment, Working Paper Series qt7gt1r0pn, Institute of Industrial Relations, UC Berkeley.

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