Sorting, incentives, and excessive managerial pay

a column by Yanhui Wu for VOX: CEPR’s Policy Portal

Performance-related pay is commonly linked to the surging incomes of top managers over recent decades. This column presents a theory to assess the role of incentive structures in sorting labour to achieve efficiency on the one hand, and in generating wage inequality on the other. The theory offers a new perspective for studying the effects of technological progress on both the wages and employment of various groups of individuals.

Continue reading

---