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Managerial Power and Compensation
According to the widely used Managerial Power Model, a higher hierarchical position with associated higher power leads to higher compensation. In contrast, the Compensating Wage Differentials Model argues that there is a non-positive relationship between positional power and total compensation. Both power and income yield utility and in equilibrium managers are prepared to trade-off the two elements. The two opposing propositions are tested using a large survey data set from Switzerland. The results suggest that power positions do not yield higher compensation. Rather, there is a non-positive relationship between power position and compensation, if one takes into account all relevant factors influencing total compensation.
Autor
Prof. Dr. Dr. h.c. mult. Bruno S. Frey
Marcel Kucher
 
Working PaperFachbereichFachrichtung
2005VolkswirtschaftslehreVolkswirtschaftspolitik
 
Schlagwörter
compensating wage differentials, managerial compensation, power