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Are Very High Salaries Necessary for Achieving Economic Efficiency?

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  • Malul, Miki
  • Rosenboim, Mosi
  • Shapira, Daniel

Abstract

An average worker in some US companies needs to work more than a year to earn his/her CEO's daily wage. We posit that the level of effort any individual can invest is bounded. Therefore, we cast doubt on the well-accepted economic notion that extremely high salaries are necessary because they ensure economic efficiency. Considering the notion of bounded effort may enrich the public discussion about the need for extreme wage levels that to date has overlooked the limited power of economic incentives.

Suggested Citation

  • Malul, Miki & Rosenboim, Mosi & Shapira, Daniel, 2021. "Are Very High Salaries Necessary for Achieving Economic Efficiency?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 94(C).
    • Handle: RePEc:eee:soceco:v:94:y:2021:i:c:s2214804321000653
    DOI: 10.1016/j.socec.2021.101725
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    References listed on IDEAS

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    Cited by:

    1. Jiaxin He & Jingyi Li & Xing Chen, 2024. "Enhancing the corporate social & environmental responsibility of Chinese energy enterprises: A view from the role of management compensation incentive," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-13, December.
    2. Dmytro Osiichuk, 2022. "The Driver of Workplace Alienation or the Cost of Effective Stewardship? The Consequences of Wage Gap for Corporate Performance," Sustainability, MDPI, vol. 14(13), pages 1-26, June.

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