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IT, Corporate Payouts, and the Growing Inequality in Managerial Compensation

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  • Stijn Van Nieuwerburgh

    (NYU)

  • Chad Syverson

    (University of Chicago)

  • Hanno Lustig

    (UCLA)

Abstract

Three of the most fundamental changes in US corporations since the early 1970s have been (1) the increase in the importance of organizational capital in production, (2) the increase in managerial income inequality, and (3) the increase in payouts to the owners. There is a unified explanation for these changes: The arrival and gradual adoption of information technology since the 1970s has stimulated the accumulation of organizational capital in existing firms. Since owners are better diversified than managers, the optimal division of rents from this organizational capital has the owners bear most of the cash-flow risk. In our model, the IT revolution benefits the owners and the managers in large successful firms, but not the managers in small firms. The resulting increase in managerial compensation inequality and the increase in payouts to owner's compare favorably to those we establish in the data.

Suggested Citation

  • Stijn Van Nieuwerburgh & Chad Syverson & Hanno Lustig, 2008. "IT, Corporate Payouts, and the Growing Inequality in Managerial Compensation," 2008 Meeting Papers 265, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:265
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    Cited by:

    1. Boyan Jovanovic & Peter L. Rousseau, 2008. "Specific Capital and Technological Variety," Journal of Human Capital, University of Chicago Press, vol. 2(2), pages 129-152.
    2. Viral V. Acharya & Stewart C. Myers & Raghuram G. Rajan, 2011. "The Internal Governance of Firms," Journal of Finance, American Finance Association, vol. 66(3), pages 689-720, June.
    3. , & ,, 2014. "Dynamic contracts when agent's quality is unknown," Theoretical Economics, Econometric Society, vol. 9(3), September.
    4. Andrea L. Eisfeldt & Dimitris Papanikolaou, 2013. "Organization Capital and the Cross-Section of Expected Returns," Journal of Finance, American Finance Association, vol. 68(4), pages 1365-1406, August.
    5. Ernst Maug & Bernd Albrecht, 2011. "Struktur und Höhe der Vorstandsvergütung: Fakten und Mythen," Schmalenbach Journal of Business Research, Springer, vol. 63(8), pages 858-881, December.

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