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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 ...