Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/225640
Authors: 
Stieglitz, Moritz
Wagner, Konstantin
Year of Publication: 
2020
Series/Report no.: 
IWH Discussion Papers 20/2020
Abstract: 
Economies of scale can explain compensation differentials over time, across firms of different size, different hierarchy-levels, and different industries. Consequently, the most talented individuals tend to match with the largest firms in industries where marginal returns to their talent are greatest. We explore a new dimension of this size-pay nexus by showing that marginal returns also differ across activities within firms and industries. Using hand-collected data on managers in European banks well below the level of executive directors, we find that the size-pay nexus is strongest for investment banking business units and for banks with a market-based business model. Thus, managerial compensation is most sensitive to size increases for activities that can easily be scaled up.
Subjects: 
banks
business models
marginal returns to talent
JEL: 
G21
G24
G34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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