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on Human Capital and Human Resource Management |
| By: | Renjie Bao; Jan De Loecker; Jan Eeckhout |
| Abstract: | To answer the question whether managers are paid for market power, we propose a theory of executive compensation in an economy where firms have market power, and the market for man- agers is competitive. We identify two distinct channels that contribute to manager pay in the model: market power and firm size. Both increase the profitability of the firm, which makes managers more valuable as it increases their marginal product. Using data on executive compensation from Com- pustat, we quantitatively analyze how market power affects Manager Pay and how it changes over time. We attribute on average 45.8% of Manager Pay to market power, from 38.0% in 1994 to 48.8% in 2019. Over this period, market power accounts for 57.8% of growth. We also find there is a lot of heterogeneity within the distribution of managers. For the top managers, 80.3% of their pay in 2019 is due to market power. Top managers are hired disproportionately by firms with market power, and they get rewarded for it, increasingly so. |
| JEL: | E2 J2 L1 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29918&r= |
| By: | Zoe B. Cullen; Will S. Dobbie; Mitchell Hoffman |
| Abstract: | State and local policies increasingly restrict employers’ access to criminal records, but without addressing the underlying reasons that employers may conduct criminal background checks. Employers may thus still want to ask about a job applicant’s criminal record later in the hiring process or make inaccurate judgments based on an applicant’s demographic characteristics. In this paper, we use a field experiment conducted in partnership with a nationwide staffing platform to test policies that more directly address the reasons that employers may conduct criminal background checks. The experiment asked hiring managers at nearly a thousand U.S. businesses to make incentive-compatible decisions under different randomized conditions. We find that 39% of businesses in our sample are willing to work with individuals with a criminal record at baseline, which rises to over 50% when businesses are offered crime and safety insurance, a single performance review, or a limited background check covering just the past year. Wage subsidies can achieve similar increases but at substantially higher cost. Based on our findings, the staffing platform relaxed the criminal background check requirement and offered crime and safety insurance to interested businesses. |
| JEL: | C93 J23 J24 M51 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29947&r= |
| By: | Van Phan (Bristol Business School, University of West of England); Carl Singleton (Department of Economics, University of Reading); Alex Bryson (Social Research Institute, University College London); John Forth (Bayes Business School, City, University of London); Felix Ritchie (Bristol Business School, University of West of England); Lucy Stokes (National Institute of Economic and Social Research (NIESR)); Damian Whittard (Bristol Business School, University of West of England) |
| Abstract: | Ethnicity wage gaps in Great Britain are large and have persisted over time. Previous studies of these gaps have been almost exclusively confined to analyses of household data, so they could not account for the role played by individual employers, despite growing evidence of their wagesetting power. We study ethnicity wage gaps using high quality employer-employee payroll data on jobs, hours, and earnings, linked with the personal and family characteristics of workers from the national census for England and Wales. We show that firm-specific wage effects account for sizeable parts of the estimated differences between the wages of white and ethnic minorityworkers at the mean and other points in the wage distribution, which would otherwise mostly have been attributed to differences in individual worker attributes, such as education levels, occupations, and locations. Nevertheless, there are substantial gaps between the wages of white and ethnic minority employees which cannot be accounted for by who people work for or other attributes, especially among higher earners. |
| Keywords: | Employer-Employee Data, Unconditional Quantile Regression, Decomposition Methods, UK Labour Market |
| JEL: | J31 J7 J71 |
| Date: | 2022–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2022-03&r= |
| By: | Daron Acemoglu; Alex He; Daniel le Maire |
| Abstract: | This paper provides evidence from the US and Denmark that managers with a business degree (“business managers”) reduce their employees' wages. Within five years of the appointment of a business manager, wages decline by 6% and the labor share by 5 percentage points in the US, and by 3% and 3 percentage points in Denmark. Firms appointing business managers are not on differential trends and do not enjoy higher output, investment, or employment growth thereafter. Using manager retirements and deaths and an IV strategy based on the diffusion of the practice of appointing business managers within industry, region and size quartile cells, we provide additional evidence that these are causal effects. We establish that the proximate cause of these (relative) wage effects are changes in rent-sharing practices following the appointment of business managers. Exploiting exogenous export demand shocks, we show that non-business managers share profits with their workers, whereas business managers do not. But consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities. Finally, we use the influence of role models on college major choice to instrument for the decision to enroll in a business degree in Denmark and show that our estimates correspond to causal effects of practices and values acquired in business education - rather than the differential selection into business education of individuals unlikely to share rents with workers. |
| JEL: | G30 J30 J31 J53 M52 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29874&r= |
| By: | Mehdi Ayouni; Franck Bien; Thomas Lanzi |
| Abstract: | In a principal-agent model with monetary transfers, we show that the delegation principle always fails even if preferences are perfectly aligned. This result holds if (i) an action that is payoff-relevant for both the principal and the agent has to be taken even if the agent rejects the proposed contract and (ii) the principal can contractually extract surplus from the agent. |
| Keywords: | Contract; Delegation; Information; Transfers. |
| JEL: | D23 D82 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2022-14&r= |