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Does Globalization Create Superstars?

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Author Info
Gersbach, Hans
Schmutzler, Armin

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Abstract

To examine the impact of globalization on managerial compensation, we consider a matching model where a number of firms compete both in the product market and in the managerial market. We show that globalization, that is, the simultaneous integration of product markets and managerial pools, leads to an increase in the heterogeneity of managerial salaries. Typically, while the most able managers obtain a wage increase, less able managers are faced with a reduction in wages. Hence our model can explain the increasing heterogeneity of CEO compensation that has been observed in the last few decades.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6222.

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Date of creation: Mar 2007
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Handle: RePEc:cpr:ceprdp:6222

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Related research
Keywords: Globalization; Manager Remuneration; Superstars;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
F15 - International Economics - - Trade - - - Economic Integration
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
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. Xavier Gabaix & Augustin Landier, 2006. "Why Has CEO Pay Increased So Much?," 2006 Meeting Papers 518, Society for Economic Dynamics. [Downloadable!]
    Other versions:
  2. Hans Gersbach & Armin Schmutzler, 2003. "Endogenous spillovers and incentives to innovate," Economic Theory, Springer, vol. 21(1), pages 59-79, 01. [Downloadable!] (restricted)
    Other versions:
  3. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Kevin J. Murphy & Ján Zábojník, 2004. "CEO Pay and Appointments: A Market-Based Explanation for Recent Trends," American Economic Review, American Economic Association, vol. 94(2), pages 192-196, May. [Downloadable!]
  5. Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 191-213, April. [Downloadable!] (restricted)
    Other versions:
  6. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September. [Downloadable!]
  7. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December. [Downloadable!] (restricted)
  8. Paolo Manasse & Alessandro Turrini, . "Trade, Wages and "Superstars"," Working Papers 140, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  9. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier. [Downloadable!] (restricted)
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Cited by:
(explanations, 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. Dario Sacco & Armin Schmutzler, 2008. "Competition and Innovation: An Experimental Investigation," Working Papers 0807, University of Zurich, Socioeconomic Institute. [Downloadable!]
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  2. Dennis Gaertner, 2007. "Monopolistic Screening under Learning By Doing," Working Papers 0718, University of Zurich, Socioeconomic Institute. [Downloadable!]
  3. Josef Falkinger, 2008. "Between Agora and Shopping Mall," Working Papers 0805, University of Zurich, Socioeconomic Institute. [Downloadable!]
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  4. Helga Fehr-Duda & Adrian Bruhin & Thomas Epper & Renate Schubert, 2007. "Rationality on the Rise: Why Relative Risk Aversion Increases with Stake Size," Working Papers 0708, University of Zurich, Socioeconomic Institute, revised Feb 2008. [Downloadable!]
  5. Daniel Halbheer & Ernst Fehr & Lorenz Goette & Armin Schmutzler, 2007. "Self-Reinforcing Market Dominance," Working Papers 0711, University of Zurich, Socioeconomic Institute. [Downloadable!]
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  6. Rafael Lalive & Armin Schmutzler, 2005. "Exploring the Effects of Competition for Railway Markets," Working Papers 0511, University of Zurich, Socioeconomic Institute, revised Apr 2007. [Downloadable!]
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  7. Adrian Bruhin, 2008. "Stochastic Expected Utility and Prospect Theory in a Horse Race: A Finite Mixture Approach," Working Papers 0803, University of Zurich, Socioeconomic Institute. [Downloadable!]
  8. Stefan Boes, 2007. "Nonparametric Analysis of Treatment Effects in Ordered Response Models," Working Papers 0709, University of Zurich, Socioeconomic Institute. [Downloadable!]
  9. Johannes Schoder & Peter Zweifel, 2008. "Managed Care Konzepte und Lösungsansätze– Ein internationaler Vergleich aus schweizerischer Sicht," Working Papers 0801, University of Zurich, Socioeconomic Institute. [Downloadable!]
  10. Dennis Gaertner, 2007. "Why Bayes Rules: A Note on Bayesian vs. Classical Inference in Regime Switching Models," Working Papers 0719, University of Zurich, Socioeconomic Institute. [Downloadable!]
  11. Dario Sacco & Armin Schmutzler, 2008. "All-Pay Auctions with Negative Prize Externalities: Theory and Experimental Evidence," Working Papers 0806, University of Zurich, Socioeconomic Institute. [Downloadable!]
  12. Roine, Jesper & Waldenström, Daniel, 2009. "Common Trends and Shocks to Top Incomes – A Structural Breaks Approach," Working Paper Series 801, Research Institute of Industrial Economics. [Downloadable!]
  13. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2007. "What Determines Top Income Shares? Evidence from the Twentieth Century," Research Papers in Economics 2007:17, Stockholm University, Department of Economics. [Downloadable!]
    Other versions:
  14. Lukas Steinmann & Harry Telser & Peter Zweifel, 2005. "The Impact of Aging on Future Healthcare Expenditure," Working Papers 0510, University of Zurich, Socioeconomic Institute, revised Dec 2006. [Downloadable!]
  15. Sandra Hanslin, 2008. "The effect of trade openness on optimal government size under endogenous firm entry," Working Papers 0802, University of Zurich, Socioeconomic Institute. [Downloadable!]
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