IT, Corporate Payouts, and the Growing Inequality in Managerial Compensation
نویسندگان
چکیده
Three of the most fundamental changes in US corporations since the early 1970s have been (1) the increase in the importance of organizational capital in production, (2) the increase in managerial income inequality, and (3) the increase in payouts to the owners. There is a unified explanation for these changes: The arrival and gradual adoption of information technology since the 1970s has stimulated the accumulation of organizational capital in existing firms. We characterize the optimal managerial compensation contract when firms accumulate organizational capital but managers cannot commit to staying in the match. The contract calls for the owners toprovide insurance tomanagement, but insurance is incomplete because the managers can leave with part of the organizational capital. In our model, the IT revolution benefits the owners and the managers in large successful firms, but not the managers in small firms. The model reproduces the increase in managerial compensation inequality and the increase in payouts to owners in the data. Hanno Lustig, email: [email protected]. Anderson School of Management, UCLA, Box 951477, Los Angeles, CA 90095-1477, tel: (310) 825-8018. http://hlustig2001.squarespace.com/. Chad Syverson: Department of Economics University of Chicago 1126 E. 59th St. Chicago, IL 60637. tel: (773)702-7815. http://www.econ.uchicago.edu/ ̃syverson. Stijn Van Nieuwerburgh, email: [email protected], Dept. of Finance, NYU, 44 West Fourth Street, Suite 9-190, New York, NY 10012. http://www.stern.nyu.edu/ ̃svnieuwe. We are grateful to Jason Faberman, Carola Frydman, Enrichetta Ravina, and Scott Schuh for generously sharing their data with us. Lorenzo Naranjo and Andrew Hollenhurst provided outstanding research assistance. For helpful comments wewould like to thank AndyAtkeson, Xavier Gabaix, Fatih Guvenen, HugoHopenhayn, Boyan Jovanovic, Adriano Rampini, Kjetil Storesletten, and participants at the UCL conference on income and consumption inequality, theNBERAsset Pricingmeetings in Cambridge, theWestern FinanceAssociation inHawaii, Society for Economic Dynamics in Cambridge, the CEPR conference in Gerzensee, and seminar participants at Duke finance, NYU Stern finance, HBS finance, Wharton finance, and the NYU macro lunch. This work is supported by the National Science Foundation under Grant No 0550910.
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