Earnings inequality and the global division of labor: Evidence from the executive labor market

Arbeitspapier

Many industrialized economies have seen a rapid rise in top income inequality and in the globalization of production since the 1980s. In this paper I propose an open economy model of executive pay to study how offshoring affects the pay level and incentives of top earners. The model introduces a simple principal-agent problem into a heterogeneous firm talent assignment model and endogenizes pay levels and the sensitivity of pay to performance in general equilibrium. Using unique data of manager-firm matches including executives from stock market listed firms across the U.S. and Europe, I quantify the model predictions empirically. Overall, I find that between 2000 and 2014 offshoring has increased executive pay levels, raised earnings inequality across executives and increased the sensitivity of pay to firm performance.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2017

Classification and Topics

• Classification: Wirtschaft
• Subject: Offshoring ; Earnings Structure ; Inequality ; Incentives ; Executive Compensation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schymik, Jan
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2017

Further information

• DOI: doi:10.5282/ubm/epub.38385
• Handle: http://hdl.handle.net/10419/191675
• URN: urn:nbn:de:bvb:19-epub-38385-3
• Last update: 10.03.2025, 11:45 AM CET