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Technological Change and the Growing Inequality in Managerial Compensation / Hanno Lustig, Chad Syverson, Stijn Van Nieuwerburgh.
- Format:
- Book
- Author/Creator:
- Lustig, Hanno.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w14661.
- NBER working paper series no. w14661
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2009.
- Summary:
- Three of the most fundamental changes in US corporations since the early 1970s have been (1) the increased importance of organizational capital in production, (2) the increase in managerial income inequality and pay-performance sensitivity, and (3) the secular decrease in labor market reallocation. Our paper develops a simple explanation for these changes: a shift in the composition of productivity growth away from vintage-specific to general growth. This shift has stimulated the accumulation of organizational capital in existing firms and reduced the need for reallocating workers to new firms. We characterize the optimal managerial compensation contract when firms accumulate organizational capital but risk-averse managers cannot commit to staying with the firm. A calibrated version of the model reproduces the increase in managerial compensation inequality and the increased sensitivity of pay to performance in the data over the last three decades.
- Notes:
- Print version record
- January 2009.
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