Search Results
Working Paper
Heterogeneity and the Effects of Aggregation on Wage Growth
This paper focuses on the implications of alternative methods of aggregating individual wage data for the behavior of economy-wide wage growth. The analysis is motivated by evidence of significant heterogeneity in individual wage growth and its cyclicality. Because of this heterogeneity, the choice of aggregation will affect the properties of economy-wide wage growth measures. To assess the importance of this consideration, we provide a decomposition of wage growth into aggregation effects and composition effects and use the decomposition to compare growth in an average wage—specifically ...
Working Paper
Heterogeneity and the Effects of Aggregation on Wage Growth
This paper focuses on the implications of alternative methods of aggregating individual wage data for the behavior of economy-wide wage growth. The analysis is motivated by evidence of significant heterogeneity in individual wage growth and its cyclicality. Because of this heterogeneity, the choice of aggregation will affect the properties of economy-wide wage growth measures. To assess the importance of this consideration, we provide a decomposition of wage growth into aggregation effects and composition effects and use the decomposition to compare growth in an average wage—specifically ...
Journal Article
Addressing Traditional Credit Scores as a Barrier to Accessing Affordable Credit
Affordable credit enables consumers to better manage their finances, cope with unexpected emergencies, and pursue opportunities such as entrepreneurship or higher education. However, many consumers face difficulties obtaining the credit they need. A major impediment is lenders’ reliance on traditional credit scores to assess consumers’ creditworthiness. These credit scores affect not only loan approval decisions but also the interest rates consumers pay on their loans. While credit scores are intended to help lenders make informed decisions about consumers’ risk of default, they do not ...
Working Paper
Contracting with Feedback
We study the effect of financial market conditions on managerial compensation structure. First, we analyze the optimal pay-for-performance in a model in which corporate decisions and firm value are both endogenous to trading due to feedback from information contained in stock prices. In a less frictional financial market, the improved information content of stock prices helps guide managerial decisions, and this information substitutes out part of the direct incentive provision from compensation contracts. Thus, the optimal pay-for-performance is lowered in response to reductions in market ...
Report
The Pay and Non-Pay Content of Job Ads
How informative are job ads about the actual pay and amenities offered by employers? Using a comprehensive database of job ads posted by Norwegian employers, we develop a methodology to systematically classify the information on both pay and non-pay job attributes advertised in vacancy texts. We link this information to measures of employer attractiveness, which we derive from a job search model estimated on observed wages and worker mobility flows. About 55 percent of job ads provide information related to pay and nearly all ads feature information on non-pay attributes. We show that ...
Report
Gender and dynamic agency: theory and evidence on the compensation of top executives
We document three new facts about gender differences in executive compensation. First, female executives receive a lower share of incentive pay in total compensation relative to males. This difference accounts for 93 percent of the gender gap in total pay. Second, the compensation of female executives displays lower pay-performance sensitivity. A $1 million increase in firm value generates a $17,150 increase in firm-specific wealth for male executives and a $1,670 increase for females. Third, female executives are more exposed to bad firm performance and less exposed to good firm performance ...
Working Paper
Bonus Question: How Does Flexible Incentive Pay Affect Wage Rigidity?
We introduce dynamic incentive contracts into a model of inflation and unemployment dynamics. Our main result is that wage cyclicality from incentives neither affects the slope of the Phillips curve for prices nor dampens unemployment dynamics. The impulse response of unemployment in economies with flexible, procyclical incentive pay is first-order equivalent to that of economies with rigid wages. Likewise, the slope of the Phillips curve is the same in both economies. This equivalence is due to effort fluctuations, which render effective marginal costs rigid even if wages are flexible. Our ...
Journal Article
Deferred cash compensation: enhancing stability in the financial services industry
Employees in financial firms are compensated for creating value for the firm, but firms themselves also serve a public interest. This tension can lead to issues that could impose a significant risk to the firm and the public. The authors describe three channels through which deferred cash compensation can mitigate such risk: by promoting a conservative approach to risk, by inducing internal monitoring, and by creating a liquidity buffer. Ultimately, the net contribution of deferred cash pay to financial stability is the sum of the effects of the three channels. The authors argue that a ...
Working Paper
What Can We Learn from Idiosyncratic Wage Changes?
I document six facts about wage changes. First, most pay revisions occur at yearly frequency, but a small proportion occur at idiosyncratic times. Second, idiosyncratic pay changes are larger and more dispersed than year-end pay changes and resemble more pay changes occurring at job-to-job transitions. Third, idiosyncratic pay changes are more common for workers with less experience and, forth, in firms higher on the job-ladder. Fifth, industries in which the incidence of idiosyncratic raises have risen have experienced greater declines in labor share. Sixth, industries in which more firms ...
Journal Article
Will Wage Growth Alone Get Workers Back Into the Labor Market? Not Likely.
This article finds that compared to baby boomers of the same age, millennials' labor force participation decisions are only about three-quarters as responsive to wage changes, and Generation X's participation decisions are only about half as responsive. These differences are not good news for employers trying to coax workers back into the labor market during a robust pandemic recovery. Using the most recent estimates, from 2019 data, the latest 6 percent year-over-year increase in average hourly pay reported by the US Bureau of Labor Statistics (BLS) is expected to only close 16 percent of ...