Power laws, CEO compensation and inequality

Calvin Blackwell, Rachel Graefe-Anderson, Frank Hefner and Dyanne Vaught

Economics Letters, 2015, vol. 126, issue C, 78-80

Abstract: We observe that CEO compensation and top incomes in the US have both been increasing rapidly over the last thirty years. We hypothesize that the trends in CEO compensation have been caused by the same economy-wide factors that have contributed to increases in income. We test this hypothesis by using ExecuComp and IRS tax data to estimate power law distributions and compare the behavior of these distributions over time. Using linear regression techniques, we estimate a power law distribution for CEO compensation and individual income. We find that the parameters of income distribution and the distribution of CEO compensation are correlated.

Keywords: Inequality; CEO compensation; Power law distribution; Pareto distribution (search for similar items in EconPapers)
JEL-codes: D31 J30 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:126:y:2015:i:c:p:78-80

DOI: 10.1016/j.econlet.2014.11.012

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