TY  - JOUR
AU  - Gabaix,Xavier
AU  - Landier,Augustin
TI  - Why Has CEO Pay Increased So Much?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12365
PY  - 2006
Y2  - July 2006
UR  - http://www.nber.org/papers/w12365
L1  - http://www.nber.org/papers/w12365.pdf
N1  - Author contact info:
Xavier Gabaix
New York University
Finance Department
Stern School of Business
44 West 4th Street, 9th floor
New York, NY 10012
Tel: 212-998-0257
Fax: 212-995-4233
E-Mail: xgabaix@stern.nyu.edu

Augustin Landier
the Toulouse School of Economics
21 Allée de Brienne
31000 Toulouse, FRANCE
E-Mail: augustin.landier@tse-fr.eu
M2  - featured in NBER digest on 2006-07-24
AB  - This paper develops a simple equilibrium model of CEO pay. CEOs have different talents and are matched to firms in a competitive assignment model. In market equilibrium, a CEO%u2019s pay changes one for one with aggregate firm size, while changing much less with the size of his own firm. The model determines the level of CEO pay across firms and over time, offering a benchmark for calibratable corporate finance. The sixfold increase of CEO pay between 1980 and 2003 can be fully attributed to the six-fold increase in market capitalization of large US companies during that period. We find a very small dispersion in CEO talent, which nonetheless justifies large pay differences. The data broadly support the model. The size of large firms explains many of the patterns in CEO pay, across firms, over time, and between countries.
ER  -