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Globalization and Executive Compensation

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This paper examines the role of globalization in the rapid increase in top incomes. Using a com- prehensive data set of thousands of executives at U.S. firms from 1993-2013, we find that exports, along with technology and firm size, have contributed to rising executive compensation. Isolating changes in exports that are unrelated to the executive’s talent and actions, we show that global- ization has affected executive pay not only through market channels but also through non-market channels. Furthermore, exogenous export shocks raise executive compensation mostly through bonus payments in poor-governance settings, in line with the hypothesis that globalization has en- hanced the executive’s rent capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that rent capture is an important part of this story.

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File URL: http://web.williams.edu/Economics/wp/KellerOlneyGlobalizationExecutiveCompensation.pdf
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Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2017-04.

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Length: 48 pages
Date of creation: Apr 2017
Handle: RePEc:wil:wileco:2017-04
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Williamstown, MA 01267

Phone: 413 597 2476
Fax: 413 597 4045
Web page: http://econ.williams.edu
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