Innovation & Inequality

    Disruption caused by innovation both creates goods the wealthy are more likely to use and eliminates jobs more likely held by working and middle class employees. We want to better understand how to respond to innovation in order to avoid or ameliorate both of these ways of exacerbating inequality.

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    The Value-Extracting CEO: How Executive Stock-Based Pay Undermines Investment in Productive Capabilities

    The business corporation is the central economic institution in a modern economy. A company’s senior executives, with the advice and support of the board of directors, are responsible for the allocation of corporate resources to investments in productive capabilities. Senior executives also advise the board on the extent to which, given the need to invest in productive capabilities, the company can afford to make cash distributions to shareholders. Motivating corporate resource-allocation decisions are the modes of remuneration that incentivize and reward the top executives of these companies. A sound analysis of the operation and performance of a modern economy requires an understanding of not only how much these executives are paid but also the ways in which the prevailing system of executive pay influences their decisions to allocate corporate resources. Read more