Why has CEO pay increased so much?
By: Xavier Gabaix, Augustin Landier
Contributors: Landier, Augustin; National Bureau of Economic Research
Series: NBER working paper series -- working paper 12365; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12365.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "This paper develops a simple equilibrium model of CEO pay.  CEOs have different talents and are matched to firms in a competitive assignment model.  In market equilibrium, a CEO's pay changes one for one with aggregate firm size, while changing much less with the size of his own firm.  The model determines the level of CEO pay across firms and over time, offering a benchmark for calibratable corporate finance.  The sixfold increase of CEO pay between 1980 and 2003 can be fully attributed to the six-fold increase in market capitalization of large US companies during that period.  We find a very small dispersion in CEO talent, which nonetheless justifies large pay differences.  The data broadly support the model.  The size of large firms explains many of the patterns in CEO pay, across firms, over time, and between countries"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/26/2006.

Includes bibliographical references.

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