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Author:Tevlin, Stacey 

Journal Article
CEO incentive contracts, monitoring costs, and corporate performance
The after-tax real wage of the average worker in the United States has fallen 13 percent in the last 20 years, while the average chief executive officer has received a pay raise of over 300 percent. This glaring contrast has sparked a flood of papers analyzing CEO compensation contracts. One of the main justifications for the extraordinary pay of top CEOs is that they receive contracts that link CEO compensation to the performance of the firm. The empirical literature, however, has found little evidence that CEO contracts provide such incentives. The compensation of CEOs appears to respond very little to the performance of their firms.> This article addresses three reasons why the previous literature may have been underestimating the response of compensation to firm performance. First, only firms where monitoring the CEOcis costly should have CEO compensation that is performance-sensitive. Restricting the sample to these firms yields a 67 percent increase in the performance sensitivity of compensation contracts. Second, the parameter that measures the performance sensitivity of CEO pay is negatively correlated to performance, causing it to be underestimated in standard regressions. Finally, econometricians do not observe exactly what compensation boards use as performance measures. Correcting this error shows that the elasticity of CEO pay with respect to firm performance is 10 times higher than previously believed.
AUTHORS: Tevlin, Stacey
DATE: 1996-01

Working Paper
The role of profits in wage determination: evidence from US manufacturing
AUTHORS: Estevao, Marcello; Tevlin, Stacey
DATE: 1995

Working Paper
Explaining the investment boom of the 1990s
Real equipment investment in the United States has boomed in recent years, led by soaring investment in computers. We find that traditional aggregate econometric models completely fail to capture the magnitude of this recent growth--mainly because these models neglect to address two features that are crucial (and unique) to the current investment boom. First, the pace at which firms replace depreciated capital has increased. Second, investment has been more sensitive to the cost of capital. We document that these two features stem from the special behavior of investment in computers and therefore propose a disaggregated approach. This produces an econometric model that successfully explains the 1990s equipment investment boom.
AUTHORS: Tevlin, Stacey; Whelan, Karl
DATE: 2000

Working Paper
Do firms share their success with workers? The response of wages to product market conditions
We provide strong new evidence that industry financial conditions play an important role in wage determination in the U.S. manufacturing sector. Ordinary least squares estimates of the effect of rents per worker on wages are positive and significant, but quite small. However, using two standard bargaining models, we illustrate that this may stem from a variety of econometric difficulties that plague the OLS estimates. In this paper, we are able to overcome these issues and identify the effects of the industry financial situation on wages. We do this using the U.S. input-output tables to isolate exogenous variation in an industry's product market conditions. Our instrumental variable estimates reveal a substantial amount of rent sharing in U.S. manufacturing---much more than is consistent with a purely competitive labor market.
AUTHORS: Estevao, Marcello; Tevlin, Stacey
DATE: 2000

Journal Article
Perspectives on the Recent Weakness in Investment
After having been a relatively bright spot early in the recovery, nonresidential private fixed investment, which in this note we refer to as business fixed investment (BFI), increased at an average annual rate of only about 4 percent in 2012 and 2013, an unusually slow pace during an expansion.
AUTHORS: Pinto, Eugenio P.; Tevlin, Stacey
DATE: 2014-05-21


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