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Power, Luck and Ideology in a Model of Executive Pay


  • Peter Skott

    () (University of Massachusetts Amherst)

  • Frederick Guy

    () (University of London)


The microprocessor and related technologies have transformed corporate and industry structure; applied in a neo?liberal environment, the technologies have had profound effects on the relative power of different groups. Skott and Guy (2007) and Guy and Skott (2008) formalized one aspect of this process of power?biased technical change: firms' increased ability to monitor low?paid employees and the resulting changes in inequality and employment at the low end of the income distribution. This paper addresses power biases and income inequality at the high end. Increasing firm?level financial volatility has intensified the agency problem and increased the power of corporate executives. These effects, which have been compounded by changes in ideology and pay norms, yielded an explosion in executive pay. JEL Categories: J31, O33

Suggested Citation

  • Peter Skott & Frederick Guy, 2013. "Power, Luck and Ideology in a Model of Executive Pay," UMASS Amherst Economics Working Papers 2013-01, University of Massachusetts Amherst, Department of Economics.
  • Handle: RePEc:ums:papers:2013-01

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    References listed on IDEAS

    1. James Crotty, 2009. "The Bonus-Driven “Rainmaker” Financial Firm: How These Firms Enrich Top Employees, Destroy Shareholder Value and Create Systemic Financial Instability," UMASS Amherst Economics Working Papers 2009-13, University of Massachusetts Amherst, Department of Economics.
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    Cited by:

    1. Yoshihara, Naoki & Veneziani, Roberto, 2018. "The Theory Of Exploitation As The Unequal Exchange Of Labour," Economics and Philosophy, Cambridge University Press, vol. 34(3), pages 381-409, November.
    2. Leila E. Davis, 2013. "Financialization and the nonfinancial corporation: an investigation of firmlevel investment behavior in the U.S., 1971-2011," UMASS Amherst Economics Working Papers 2013-08, University of Massachusetts Amherst, Department of Economics.
    3. Kim, Hyeon-Kyeong & Skott, Peter, 2014. "Labor market reform and wage inequality in Korea," UMASS Amherst Economics Working Papers 2014-13, University of Massachusetts Amherst, Department of Economics.

    More about this item


    communications technology; power-biased technical change; inequality; executive pay; efficiency wage;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • 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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