Management Compensation and Firm-Level Income Inequality
AbstractIn recent decades, most developed countries have experienced a simultaneous increase in income inequality and management compensation. In this paper, we study the relation between management compensation and firm-level income dynamics in a general equilibrium model. Empirical estimation, of the model’s key parameters show that the rising management premium is indeed the main driving force behind the observed increase in income inequality. This is the case even when other potential sources such as technological progress and skill-biased technological change are taken into account. We also show that a rising management premium produces income distribution dynamics at the firm level which are similar to those observed at the market level, i.e. rising income inequality overall as well as within and between education groups.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3676.
Length: 28 pages
Date of creation: Sep 2008
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Find related papers by JEL classification:
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
- M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
- NEP-BEC-2008-09-20 (Business Economics)
- NEP-DGE-2008-09-20 (Dynamic General Equilibrium)
- NEP-LAB-2008-09-20 (Labour Economics)
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