Productivity: The Role of Market Power, Managers and Management Practices
Paper Session
Friday, Jan. 5, 2024 10:15 AM - 12:15 PM (CST)
- Chair: Renata Lemos, World Bank
Manager Pay Inequality and Market Power
Abstract
Manager pay has increased considerably since 1980, and so has inequality in manager pay. During the same period, there has been a sharp rise in market power. Besides the conventional role of managers to grow firm size and increase productivity, we acknowledge that managers also help firms gain more market power. We model how imperfect competition in product markets affects manager pay, and decompose the contribution to manager pay from firm size and market power. We find that market power contributes on average 45.2% to compensation. Most strikingly, there is significant heterogeneity across managers. Top managers are hired disproportionately by firms with market power, and they get rewarded for it: 80.3% of top manager pay in 2019 was due to market power. Our main conclusion is that the rise of market power is responsible for half of the increase in average manager pay, and for nearly all of the increase in manager pay inequality.CEOs and Development
Abstract
We develop a parsimonious measure of CEOs’ time use that can be employed in firm surveys to distinguish “leaders” and “managers” (as in Bandiera et al, 2020). We include this in the EBRD-WB BEEPS survey that covers 13,000 firms in 41 middle and high income countries. In this paper, we analyze matching between CEOs and firms across 41 countries in Europe, MENA and Central Asia compared to, e.g., the U.S. and demonstrate that CEO leadership style can be identified with four simple questions. We show that (1) the share of leader style CEOs increases with GDP per capita; (2) firms that are predicted to need a leader (manager) based on high-income country matching patterns have higher productivity if they hire a leader (manager), but other firms do not – i.e., there are gains to matching; and (3) the mismatch between CEO types and firms is larger in countries with lower GDP per capita, higher corruption and lower competitiveness. At the firm level, the share of private foreign ownership is associated with better matching.Understanding School Management with Public Data: New Measurement Approaches and Applications
Abstract
Why do some students learn more in some schools than others? One consideration receiving growing attention is school management. To study this, researchers need to be able to measure school management accurately and cheaply at scale. This paper introduces a new approach to measuring organizational practices and outcomes using existing public data and exemplifies the methodology using two large existing datasets: PISA, covering about 15,000 schools across 65 countries, and Prova Brasil, covering nearly all public schools in Brazil across 6 waves over 10 years. Both indices show a strong, positive relationship between school management and student learning. We outline two potential applications in how to use this data: (a) to help understand changes in practices, and (b) to formalize and test potential mechanisms behind the key performance relationship.JEL Classifications
- O4 - Economic Growth and Aggregate Productivity
- M2 - Business Economics