Manager Pay Inequality and Market Power
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ID: 315834
2026
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Abstract
Abstract Manager pay has increased considerably since 1980, and so has inequality in manager pay. Over the same period, there has been a sharp rise in market power. We start from the premise that the role of managers is to increase firm productivity. When markets are imperfectly competitive, productivity not only helps firm grow in size, productivity also affects market power. We model how imperfect competition in product markets affects manager pay, and break down the contributions of firm size and market power to compensation. We find that market power, on average, accounts for 45.2% of total manager pay. Notably, there is substantial variation across managers. Top managers are disproportionately employed by firms with market power, and they benefit from it: in 2019, 80.3% of top manager pay is attributable to market power. Our main conclusion is that rise of market power explains half of the increase in average manager pay, and nearly all of the increase in manager pay inequality.
| Reference Key |
openalex_W7163522876
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|---|---|
| Authors | Renjie Bao, Jan De Loecker, Jan Eeckhout |
| Journal | The Review of Economic Studies |
| Year | 2026 |
| DOI |
10.1093/restud/rdag035
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| URL | |
| Keywords | Keywords not found |
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