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

Cuñat, Vicente 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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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
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Finance
Research centres and groups > Financial Markets Group (FMG)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 08 Feb 2011 10:03
URL: http://eprints.lse.ac.uk/32245/

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