Who sets CEO pay? Our standard answer to this question has been shaped by principal agent theory: shareholders set CEO pay. They use pay to limit the moral hazard problem caused by the low ownership stakes of CEOs. Through bonuses, options, or long term contracts, shareholders can motivate the CEO to maximize firm wealth. In other words, shareholders use pay to provide incentives, a view we refer to as the contracting view. An alternative view, championed by practitioners such as Crystal (1991), argues that CEOs set their own pay. They manipulate the compensation committee and hence the pay process itself to pay themselves what they can. The only constraints they face may be the availability of funds or more general fears, such as not wanting to be singled out in the Wall Street Journal as being overpaid. We refer to this second view as the skimming view. In this paper, we investigate the relevance of these two views.
Human error due to risky behaviour is a common and important contributor to acute injury related to poverty. We studied whether social benefit payments mitigate or exacerbate risky behaviours that lead to emergency visits for acute injury among low-income mothers with dependent children.
Targeting assistance to the poor is a central problem in development. We study the problem of designing a proxy means test when the implementing agent is corruptible. Conditioning on more poverty indicators may worsen targeting in this environment because of a novel tradeo between statistical accuracy and enforceability. We then test necessary conditions for this tradeo using data on Below Poverty Line card allocation in India. Less eligible households pay larger bribes and are less likely to obtain cards, but widespread rule violations yield a de facto allocation much less progressive than the de jure one. Enforceability appears to matter
We use a theoretical model and empirically-calibrated simulations of the automobile market to show how the traditional logic of Pigouvian taxation changes when consumers are inattentive to energy costs. Under inattention, there is a "Triple Dividend" from externality taxes: aside from reducing the provision of public bads and generating government revenue, they also reduce allocative ine¢ ciencies caused by underinvestment in energy e¢ cient capital stock. While Pigouvian taxes are clearly the preferred policy mechanism when externalities are the only market failure, inattention provides an "Internality Rationale" for alternative policies such as subsidies that reduce the relative price of energy e¢ cient durable goods. However, heterogeneity in the way that consumers optimize or misoptimize means that non-discriminatory taxes and subsidies are blunt instruments for addressing misoptimization: any given policy is too strong for some consumers and too weak for others. We therefore discuss "Behavioral Targeting": the use of mechanisms such as tagging, screening, and nudges that preferentially a§ect misoptimizers. We also formally deÖne a class of mechanisms called "Nudge-Inducing Policies," which are taxes speciÖcally designed to encourage Örms to use advertising, information provision, retail sales interactions, and other nudges to debias misoptimizing consumers.