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Does globalization create superstars? A simple theory of managerial wages


Gersbach, Hans; Schmutzler, Armin (2014). Does globalization create superstars? A simple theory of managerial wages. European Economic Review, 71:34-51.

Abstract

To examine the impact of globalization on managerial remuneration, we consider a matching model where firms compete both in the product market and in the managerial market. We show that globalization, i.e., 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 is consistent with the increasing heterogeneity of CEO remuneration that has been observed in the last few decades.

Abstract

To examine the impact of globalization on managerial remuneration, we consider a matching model where firms compete both in the product market and in the managerial market. We show that globalization, i.e., 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 is consistent with the increasing heterogeneity of CEO remuneration that has been observed in the last few decades.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:October 2014
Deposited On:09 Oct 2014 13:12
Last Modified:08 Dec 2017 07:31
Publisher:Elsevier
ISSN:0014-2921
Publisher DOI:https://doi.org/10.1016/j.euroecorev.2014.03.006

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