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Globalization and the provision of incentives inside the firm: the effect of foreign competition

Cuñat, Vicente ORCID: 0000-0001-7504-2801 and Guadalupe, Maria (2009) Globalization and the provision of incentives inside the firm: the effect of foreign competition. Journal of Labor Economics, 27 (2). pp. 179-212. ISSN 0734-306X

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Identification Number: 10.1086/599817

Abstract

This article studies the effect of changes in foreign competition on the structure of compensation and incentives of U.S. executives. We find that import penetration (instrumented with exchange rates and tariffs) leads to more incentive provision in a variety of ways. First, it increases the sensitivity of pay to performance. Second, it increases within‐firm pay differentials between executive levels, with CEOs typically experiencing the largest wage increases. Finally, higher foreign competition is also associated with a higher demand for talent. These results suggest that increased foreign competition can explain some of the recent trends in compensation structures.

Item Type: Article
Official URL: http://www.jstor.org/action/showPublication?journa...
Additional Information: © 2009 The University of Chicago
Divisions: Finance
Financial Markets Group
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Date Deposited: 08 Feb 2011 10:03
Last Modified: 25 Jan 2024 05:00
URI: http://eprints.lse.ac.uk/id/eprint/32245

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