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Why Has CEO Pay Increased so Much?
This paper develops a simple equilibrium model of CEO pay. CEOs have different talents and are matched to firms in a competitive assignment model. In market equilibrium, a CEO’s pay changes one forExpand
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Zipf's Law for Cities: An Explanation
Zipf ’s law is a very tight constraint on the class of admissible models of local growth. It says that for most countries the size distribution of cities strikingly fits a power law: the number ofExpand
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The Granular Origins of Aggregate Fluctuations
This paper proposes that idiosyncratic firm-level fluctuations can explain an important part of aggregate shocks, and provide a microfoundation for aggregate productivity shocks. Existing researchExpand
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Variable Rare Disasters: An Exactly Solved Framework for Ten Puzzles in Macro-Finance
This paper incorporates a time-varying intensity of disasters in the Rietz-Barro hypothesis that risk premia result from the possibility of rare, large disasters. During a disaster, an asset’sExpand
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Power Laws in Economics and Finance
A power law is the form taken by a large number of surprising empirical regularities in economics and finance. This article surveys well-documented empirical power laws concerning income and wealth,Expand
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Rank − 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents
Despite the availability of more sophisticated methods, a popular way to estimate a Pareto exponent is still to run an OLS regression: log(Rank) = a − b log(Size), and take b as an estimate of theExpand
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The Granular Origins of Aggregate Fluctuations
This paper proposes that idiosyncratic firm-level fluctuations can explain an important part of aggregate shocks, and provide a microfoundation for aggregate productivity shocks. Existing researchExpand
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Power Laws in Economics and Finance
A power law (PL) is the form taken by a large number of surprising empirical regularities in economics and finance. This review surveys well-documented empirical PLs regarding income and wealth, theExpand
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A Multiplicative Model of Optimal CEO Incentives in Market Equilibrium
This paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium, by embedding a moral hazard problem into a talent assignment model. By consideringExpand
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A Sparsity-Based Model of Bounded Rationality
This paper defines and analyzes a "sparse max" operator, which is a less than fully attentive and rational version of the traditional max operator. The agent builds (as economists do) a simplifiedExpand
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