CEO–Employee Pay Gap, Productivity and Value Creation

This study examines the effect of the CEO–employee pay gap on productivity and performance. Using extensive data of 751 constituents of the Standard and Poor’s (S&P) 1500 index between the years 1992–2016, we found a cubic relationship between salary differential and corporate productivity, with a rising gap adversely affecting productivity principally when it is both too low, as well as too high; intermediate pay inequality levels are less influential. A contrast in the productivity effects of the CEO–worker pay gap for firms with high average salaries and more employees was noticeable, whereas positive productivity gains were present even with a high salary gap. Thus, big companies with a highly skilled workforce are able to achieve tangible benefits through higher salary differentiation. On the other hand, companies with lower average salaries and lower capital intensity were characterized by the negative effects of wage dispersion on productivity. As a result, increasing inequality aversion is an important issue affecting performance among smaller, lower skilled labor dependent firms. Additionally, female CEOs had a significant and positive lagged effect on productivity. Finally, firm market valuation was positively stimulated by the increasing pay gap.

Racial Differences in National Basketball Association Players' Salaries: A New Look

This article empirically examines racial salary differences in the National Basketball Association from 1987 to 1993. The results of our analysis depict the NBA as a racially equal labor market which experienced tremendous growth over this period. In contrast to studies using mid-1980's data which estimated a white advantage between twelve and twenty-five percent, we find that no significant racial wage differential exists. The convergence of the salary differential between 1984 and 1993 can be fully explained by a narrowing in the relative prices paid for additional production and an increase in the relative production of black players. Furthermore, a regression capturing customer preferences yields the result that customers, who during the mid-1980's preferred white players, no longer differentiate between white and black players.