Are Ceos Superstars? the Deep Structure of Top Managerial Pay in New Zealand Listed Companies, 1995-2014.

Abstract : ABSTRACT: A unique database on numbers and pay of all employees earning more than $150,000/year in all New Zealand listed companies between 1995 and 2014 reveals substantive similarities in the determinants of pay of the CEO and of the senior managers reporting to the CEO. The results are unsupportive of recent theories assuming CEO exceptionalism.

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Segmentation in Urban Labor Markets: a Machine Learning Application and a Contracting Perspective

Abstract : A significant fraction of the labor force in developing countries is “informally” employed outside the “formal” sector. Much of academic thinking uses this dichotomous view to study (urban) labor markets in developing countries, although in the presence of imperfectly enforced institutions employers and employees could choose any contract that satisfies their preferences and meets their constraints. I employ labor force survey data from Tanzania and unsupervised Bayesian machine learning to estimate the latent structure of observed contracts in the urban private sector of Dar-es-Salaam. The results suggest that around 30% of the relevant population cannot be adequately captured using a dichotomous view of the market. Controlling for employees’ observable characteristics, I estimate wage distributions that suggest that workers are willing to trade off formal protections against higher pecuniary remuneration. Taken together the results suggest that a non-negligible fraction voluntarily chooses non-formal employment. An economic contracting framework is presented that formalizes the argument’s underlying principles.

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Career Concerns in Knowledge Creation

Abstract : I study the effect of career concerns on research productivity through effort and selection effects using the introduction of performance pay in German academia as a natural experiment. To this end, I consolidated information from various, unstructured data sources to construct a data set that encompasses the affiliation history and publication records of the universe of academics in Germany. The reform introduced attraction and retention bonuses that give rise to strong career concerns, and relatively weaker on-the-job performance bonuses that take effect at a later point in time. I estimate the pure effort effect of these incentives in a DiD framework, comparing changes in research productivity in cohorts of academics that are differentially impacted by the reform. I find a positive effort effect of career concerns that is economically large; amounting to a 12 to 16% average increase in research productivity. This increase manifests itself most robustly as an increase in research quantity and persists for a number of years. Furthermore, the effort response is strongest and most robust for below-median productive academics, with increases in pure quantity as well as quality-adjusted research output, while top quartile academics do not significantly increase output. I then estimate the selection effect using the single-crossing property of the old and new wage schemes, which gives rise to selection incentives that are inversely related to age. Exploiting this variation in another DiD framework, I find that more productive academics are more likely to select into performance pay. Hence, performance pay, particularly in the form of career concerns, increases research output in academia through both effort and selection effects. However, because the effort effect is strongest for relatively less productive academics, while relatively more productive academics select into performance pay, the selection effect partially counteracts the effort effect.

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