Discussion Paper Details

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Title: Globalization and Executive Compensation

Author(s): Wolfgang Keller and Will Olney

Publication Date: May 2017

Keyword(s): corporate governance, Distributional Effects, Executive compensation, Globalization and inequality

Programme Area(s): Financial Economics, International Trade and Regional Economics and Labour Economics

Abstract: Employing comprehensive data on top executives at major U.S. companies, we show that their compensation is increasing with exports, as well as firm size and technology. Exogenous export shocks unrelated to managerial decisions also increase executive compensation, and there is little evidence that this is due to increasing returns to talent. We do find that export shocks primarily affect discretionary forms of compensation of more powerful executives at firms with poor corporate governance, as one would expect if globalization has enhanced rent-capture opportunities. Overall, globalization has been more important for the rapid growth of executive compensation and U.S. inequality than previously thought, with rent-capture playing a role.

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Bibliographic Reference

Keller, W and Olney, W. 2017. 'Globalization and Executive Compensation'. London, Centre for Economic Policy Research.