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Foreign competition and executive compensation in the manufacturing industry: A comparison between Germany and the U.S

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  • Dyballa, Katharina
  • Kraft, Kornelius

Abstract

In this study we use import penetration as a proxy for foreign competition in order to empirically analyze (1) the impact of foreign competition on managerial compensation, (2) differences in the impact between Germany and the U.S. and (3) whether the impact of import penetration is driven by implied efficiency effects. We use data from the manufacturing industry covering the period from 1984-2010 for Germany respectively 1992-2011 for the U.S. and apply system GMM in order to solve potential endogeneity problems. It turns out that foreign competition leads to an increase of average per capita executive compensation in both countries. The impact of foreign competition on payperformance sensitivity differs between the U.S. and Germany. A differentiation between imported intermediates (efficient sourcing strategy) and final inputs (competition) reveals that the impact of import penetration is not biased by efficiency effects.

Suggested Citation

  • Dyballa, Katharina & Kraft, Kornelius, 2018. "Foreign competition and executive compensation in the manufacturing industry: A comparison between Germany and the U.S," ZEW Discussion Papers 18-034, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:18034
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    More about this item

    Keywords

    Foreign Competition; Outsourcing; Managerial Incentives; International Comparison; System GMM;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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