Does Globalization Create Superstars?

Gersbach, Hans; Schmutzler, Armin

Purchase - $8 CEPR Subscribers Download

Add Paper to My Library

Does Globalization Create Superstars?

CEPR Discussion Paper No. DP6222

25 Pages Posted: 22 May 2008

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: March 2007

Abstract

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

Keywords: Globalization, Manager Remuneration, Superstars

JEL Classification: D43, F15, J31, L13

Suggested Citation: Suggested Citation

Gersbach, Hans and Schmutzler, Armin, Does Globalization Create Superstars? (March 2007). CEPR Discussion Paper No. DP6222, Available at SSRN: https://ssrn.com/abstract=1135462