Why Has CEO Pay Increased So Much?

Xavier Gabaix () and Augustin Landier
Additional contact information
Augustin Landier: New York University

The Quarterly Journal of Economics, 2008, vol. 123, issue 1, pages 49-100

Abstract: 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 depends on both the size of his firm and the aggregate firm size. The model determines the level of CEO pay across firms and over time, offering a benchmark for calibratable corporate finance. We find a very small dispersion in CEO talent, which nonetheless justifies large pay differences. In recent decades at least, the size of large firms explains many of the patterns in CEO pay, across firms, over time, and between countries. In particular, in the baseline specification of the model's parameters, the sixfold increase of U.S. CEO pay between 1980 and 2003 can be fully attributed to the sixfold increase in market capitalization of large companies during that period. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

Date: 2008
View citations in EconPapers

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdfplus/10.1162/qjec.2008.123.1.49 link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Why Has CEO Pay Increased So Much? (2006)
Working Paper: Why Has CEO Pay Increased So Much? (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:tpr:qjecon:v:123:y:2008:i:1:p:49-100

Ordering information: This journal article can be ordered from
http://mitpress.mit. ... me.tcl?issn=00335533

Access Statistics for this article

The Quarterly Journal of Economics is edited by Robert J. Barro, Edward L. Glaeser and Lawrence F. Katz

More articles in The Quarterly Journal of Economics from MIT Press
Series data maintained by Christopher F. Baum ().