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Does globalization create superstars? A simple theory of managerial wages

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  • Gersbach, Hans
  • Schmutzler, Armin

Abstract

To examine the impact of globalization on managerial remuneration, we consider a matching model where firms compete both in the product market and in the managerial market. We show that globalization, i.e., 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 is consistent with the increasing heterogeneity of CEO remuneration that has been observed in the last few decades.

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  • Gersbach, Hans & Schmutzler, Armin, 2014. "Does globalization create superstars? A simple theory of managerial wages," European Economic Review, Elsevier, vol. 71(C), pages 34-51.
  • Handle: RePEc:eee:eecrev:v:71:y:2014:i:c:p:34-51 DOI: 10.1016/j.euroecorev.2014.03.006
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    Cited by:

    1. Schymik, Jan Simon, 2015. "Trade, Technologies, and the Evolution of Corporate Governance," Discussion Papers in Economics 24871, University of Munich, Department of Economics.
    2. Morten Olsen & Joshua Gottlieb & David Hemous & Jeffrey Clemens, 2017. "The Spill-over Effects of Top Income Inequality," 2017 Meeting Papers 332, Society for Economic Dynamics.
    3. Hans Gersbach & Hans Haller, 2015. "Matching on Bipartite Graphs," CESifo Working Paper Series 5575, CESifo Group Munich.

    More about this item

    Keywords

    Globalization; Manager remuneration; Superstars;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - 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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