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Power, Luck and Ideology – Technological and Institutional Parameters of the Agency Problem for CEOs

Author

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  • Peter Skott

    (Department of Economics, University of Massachusetts, Amherst, MA 01003, USA)

  • Frederick Guy

    (Department of Management, Birkbeck, University of London, London, UK)

Abstract

We propose an explanation for the growth of executive pay since the 1980s. New information and communication technologies (ICTs) appear to favor winner-take-all markets and to accentuate firm-level volatility of profits. We show, using an efficiency wage model, that these changes lead to higher executive pay. This is an example of what we have called, in other contexts, power-biased technological change (PBTC). The changes in market structure and the power of CEOs, however, are not only technologically but also institutionally contingent.JEL Classification: D31, J41, O33

Suggested Citation

  • Peter Skott & Frederick Guy, 2013. "Power, Luck and Ideology – Technological and Institutional Parameters of the Agency Problem for CEOs," Review of Radical Political Economics, Union for Radical Political Economics, vol. 45(3), pages 323-332, September.
    • Handle: RePEc:sae:reorpe:v:45:y:2013:i:3:p:323-332
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    Citations

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    Cited by:

    1. Peter Skott, 2017. "Weaknesses of 'wage-led growth'," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(3), pages 336-359, July.
    2. Bruce Pietrykowski, 2017. "Revaluing Low-Wage Work," Review of Radical Political Economics, Union for Radical Political Economics, vol. 49(1), pages 5-29, March.

    More about this item

    Keywords

    information technology; power-biased technical change; inequality; CEO compensation; efficiency wage; winner-take-all;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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