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The Effect of Labor Market Demand on U.S. CEO Pay Since 1980

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  • Gregory L. Nagel

Abstract

This paper shows that the rise in U.S. chief executive officer (CEO) pay from 1980 to 2003 is only partially explained by competition for profit‐producing talent in the labor market. This conclusion is obtained by removing unintended data biases from tests of the only theoretical model in the literature that relates labor market competition (measured by large firm size) to CEO pay level. When the biases are removed or minimized, no more than 33% of the 600+ percentage rise in large‐firm CEO pay since 1980 is explained by a corresponding increase in large firm size.

Suggested Citation

  • Gregory L. Nagel, 2010. "The Effect of Labor Market Demand on U.S. CEO Pay Since 1980," The Financial Review, Eastern Finance Association, vol. 45(4), pages 931-950, November.
    • Handle: RePEc:bla:finrev:v:45:y:2010:i:4:p:931-950
    DOI: 10.1111/j.1540-6288.2010.00279.x
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    Cited by:

    1. Alex Edmans & Xavier Gabaix, 2016. "Executive Compensation: A Modern Primer," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1232-1287, December.
    2. Shue, Kelly & Townsend, Richard R., 2017. "Growth through rigidity: An explanation for the rise in CEO pay," Journal of Financial Economics, Elsevier, vol. 123(1), pages 1-21.
    3. Kelly Shue & Richard Townsend, 2016. "Growth through Rigidity: An Explanation for the Rise in CEO Pay," NBER Working Papers 21975, National Bureau of Economic Research, Inc.
    4. Olivier Godechot, 2011. "Finance and the rise in inequalities in France," Working Papers halshs-00584881, HAL.

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