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Pay Cuts for the Boss: Executive Compensation in the 1940s

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  • FRYDMAN, CAROLA
  • MOLLOY, RAVEN

Abstract

Executive pay fell during the 1940s, marking the last notable decrease in the past 70 years. We study this decline using a new panel data set on the remuneration of top executives in 246 firms. Government regulation—including explicit salary restrictions and taxation—had, at best, a modest effect on executive pay. By contrast, a decline in the returns to firm size and an increase in the power of labor unions contributed greatly to the reduction in executive compensation relative to other workers’ earnings from 1940 to 1946. The continued decrease in relative executive pay remains largely unexplained.

Suggested Citation

  • Frydman, Carola & Molloy, Raven, 2012. "Pay Cuts for the Boss: Executive Compensation in the 1940s," The Journal of Economic History, Cambridge University Press, vol. 72(01), pages 225-251, March.
  • Handle: RePEc:cup:jechis:v:72:y:2012:i:01:p:225-251_00
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    Cited by:

    1. Brantly Callaway & William J. Collins, 2017. "Unions, Workers, and Wages at the Peak of the American Labor Movement," NBER Working Papers 23516, National Bureau of Economic Research, Inc.
    2. Carola Frydman & Dimitris Papanikolaou, 2015. "In Search of Ideas: Technological Innovation and Executive Pay Inequality," NBER Working Papers 21795, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-

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