Does globalization create superstars? A simple theory of managerial wages

Armin Schmutzler and Hans Gersbach

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: To examine the impact of globalization on managerial compensation, we consider a matching model where firms compete both in the product market and in the managerial market. We show that globalization, that is, the simultaneous integration of product markets and managerial pools, leads to an increase in the heterogeneity of managerial salaries. Typically, while the most able managers obtain a wage increase, less able managers are faced with a reduction in wages. Hence our model can explain the increasing heterogeneity of CEO compensation that has been observed in the last few decades.

JEL-codes: F15 J33 L13 (search for similar items in EconPapers)
Date: 2013
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Journal Article: Does globalization create superstars? A simple theory of managerial wages (2014)
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