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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:

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    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. Florian Dorn & Christoph Schinke, 2018. "Top income shares in OECD countries: The role of government ideology and globalisation," The World Economy, Wiley Blackwell, vol. 41(9), pages 2491-2527, September.
    4. Norbäck, Pehr-Johan & Olsson, Martin & Persson, Lars, 2016. "Talent Development and Labour Market Integration: The Case of EU Football," Working Paper Series 1126, Research Institute of Industrial Economics, revised 14 Mar 2018.
    5. Joel HELLIER, 2021. "Globalization and Inequality in Advanced Economies: A Provisional Assessment," Working Papers 575, ECINEQ, Society for the Study of Economic Inequality.
    6. Dyballa, Katharina & Kraft, Kornelius, 2018. "Foreign Competition and Executive Compensation in the Manufacturing Industry: A Comparison between Germany and the U.S," IZA Discussion Papers 11713, Institute of Labor Economics (IZA).
    7. Pehr‐Johan Norbäck & Martin Olsson & Lars Persson, 2021. "Talent development and labour market integration in European football," The World Economy, Wiley Blackwell, vol. 44(2), pages 367-408, February.
    8. Gersbach, Hans & Haller, Hans, 2022. "Gainers and losers from market integration," Mathematical Social Sciences, Elsevier, vol. 116(C), pages 32-39.
    9. Schymik, Jan, 2018. "Globalization and the evolution of corporate governance," European Economic Review, Elsevier, vol. 102(C), pages 39-61.
    10. Schymik, Jan Simon, 2015. "Trade, Technologies, and the Evolution of Corporate Governance," Discussion Papers in Economics 24871, University of Munich, Department of Economics.
    11. Kohl, Miriam, 2020. "Redistribution, selection, and trade," Journal of International Economics, Elsevier, vol. 122(C).
    12. Joël Hellier, 2022. "Asymmetric Globalization and Top Performers Income," Working Papers REM 2022/0242, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    13. Joel Hellier, 2023. "Asymmetric Globalization, Top Performers’ Income and Inequality," Working Papers 634, ECINEQ, Society for the Study of Economic Inequality.
    14. Hans Gersbach & Hans Haller, 2015. "Matching on Bipartite Graphs," CESifo Working Paper Series 5575, CESifo.

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    More about this item

    Keywords

    Globalization; Manager remuneration; Superstars;
    All these keywords.

    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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