This paper presents an assignment model of CEOs and firms. The distributions of CEO pay levels and firms' market values are analyzed as the competitive equilibrium of a matching market where talents, as well as CEO positions, are scarce. It is shown how the observed joint distribution of CEO pay...

New graduates of elite MBA programs flock to Wall Street during bull markets and start their careers elsewhere when the stock market is weak. Given the transferability of MBA skills, it seems likely that any effect of stock returns on MBA placement would be short-lived. In this paper, I use a...

We argue that financial market development contributed to the rise in the skill premium and residual wage inequality in the US since the 1980s. We present an endogenous growth model with imperfect credit markets and establish how improving the efficiency of these markets affects modes of...

This paper provides the first comparative examination of the consequences of leveraged buyouts (LBOs) and traditional corporate acquisitions on employment and wages using a uniquely constructed panel data set covering the period 1996-2006. Employing propensity score matching combined with...

In individual account pension systems, members bear the risks and consequences of their investment decisions. If participants behave as predicted by economic theory, such responsibility would be welfare-enhancing as members would invest and hold a portfolio of financial assets with a risk-return...

We study the role of peer groups in determining the structure and the total amount of executive compensation. Our analysis is based on a standard agency model in which the agent's reservation utility is related to the peer group used for performance evaluation. Our main result is that the...

It is widely believed that because of liquidity constraints and vesting requirements, executives value stock options at less than market or Black-Scholes-Merton values, as would be perceived by outside investors. This belief is contingent, however, on a subtle assumption that executives are,...

We consider how much of the top end of the income distribution can be attributed to four sectors - top executives of non-financial firms (Main Street); financial service sector employees from investment banks, hedge funds, private equity funds, and mutual funds (Wall Street); corporate lawyers;...

Analyzing a large panel that matches public firms with worker-level data, we find that managerial entrenchment affects workers' pay. CEOs with more control pay their workers more, but financial incentives through ownership of cash flow rights mitigate such behavior. These findings do not seem to...

I study the economic consequences of tax deductibility limits on salaries for the design of incentive contracts. The analysis is based on a simple agency model in which the firm's cash flow is a function of the agent's effort and an observable random factor beyond the agent's control. According...