Frontiers of economic research

Controlling UK executive pay

Ian Gregory-Smith, Steve Thompson, Peter Wright, 24 March 2014

In 2003, the UK adopted a ‘say on pay’ policy, whereby quoted companies’ executive compensation offers have to be put to a shareholder vote. This column presents evidence that this policy has had a relatively modest impact on executive pay. A 10% increase in compensation is associated with an increase in shareholder dissent against the proposal of just 0.2%. However, remuneration committees representing the more highly rewarded CEOs are quite sensitive to dissent, provided it exceeds a critical threshold of about 10%. Shareholders do not appear more anxious about pay since the crisis.

Industry-centric economic measurement

Mike Orszag, Urvi Shriram, Dennis J Snower, 13 March 2014

Economic performance is increasingly defined by the idiosyncratic characteristics of companies operating across national borders, making anachronistic the treatment of the country as the basic unit of economic analysis when measuring performance. This column presents a new way of measuring economic performance and describes the Economic Performance Index (EPI) developed by the Global Economic Symposium and Towers Watson. Heterogeneous activity at the industry level better informs decision-makers acting in specific contexts.

New evidence on the durability of social norms

John Helliwell, Shun Wang, Jinwen Xu, 12 March 2014

Social norms have been shown to have important effects on economic outcomes. This column discusses new evidence showing that social norms are deeply rooted in long-standing cultures, but do evolve in reaction to major changes. It draws on a fully global sample involving migrants in more than 130 countries, using seven waves of the Gallup World Poll.

What good are children?

Angus Deaton, Arthur Stone, 4 March 2014

Study after study has shown that those who live with children are less satisfied with their lives than those who do not. Is there something wrong with these empirical analyses? Or is it that happiness measures are unreliable? This column argues that the results are correct but that comparisons of the wellbeing of parents and non-parents are of no help at all for people trying to decide whether to have children.

Measuring economic progress

Diane Coyle, 17 February 2014

Criticism of Gross Domestic Product (GDP) as an indicator of the health of the economy has grown in recent years, in part because of a new focus on measures of subjective well-being or ‘happiness’. This column argues that the debate needs to distinguish between the different purposes of measurement: economic activity, social welfare, and sustainability are distinct concepts and cannot be captured by a single indicator. There are good arguments for paying less attention to GDP and more to indicators of welfare and sustainability, but it would be a mistake to adjust or replace GDP.

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