David Gaddis Ross

Fatherhood and Managerial Style How a Male CEO’s Children Affect the Wages of His Employees

Motivated by a growing literature in the social sciences suggesting that the transition to fatherhood has a profound effect on men’s values, we study how the wages of employees change after a male chief executive officer (CEO) has children, using comprehensive panel data on the employees, CEOs, and families of CEOs in all but the smallest Danish firms between 1996 and 2006. We find that (a) a male CEO generally pays his employees less generously after fathering a child, (b) the birth of a daughter has a less negative influence on wages than does the birth of a son and has a positive influence if the daughter is the CEO’s first, and (c) the wages of female employees are less adversely affected than are those of male employees and positively affected by the CEO’s first child of either gender. We also find that male CEOs pay themselves more after fathering a child, especially after fathering a son. These results are consistent with a desire by the CEO to husband more resources for his family after fathering a child and the psychological priming of the CEO’s generosity after the birth of his first daughter and specifically toward women after the birth of his first child of either gender.

On a Firm's Optimal Response to Pressure for Gender Pay Equity

We present a theory of how a rational, profit-maximizing firm would respond to pressure for gender pay equity by strategically distributing raises to reduce the pay gap between its female and male employees at minimum cost. Using formal analysis and pay data from a real employer, we show that (a) employees in low-paying jobs and whose pay-related observables are similar to those of men at the firm are most likely to get raises; (b) counterintuitively, some men may get raises and giving raises to certain women would increase the pay gap; and (c) a firm can reduce the gender pay gap as measured by a much larger percentage than the overall increase in pay to women at the firm. We also identify the conditions under which a firm could “explain away�? a gender pay gap using other pay-related observables like job category, as well as the conditions under which this strategy would backfire. Our paper helps explain some empirical puzzles, such as the tendency for some men to get raises after gender equity pay reviews, and yields a rich set of implications for empirical research and practice.

On Externalities and Incentives: The Role of the Market Power and Organizational Form of Financial Intermediaries

We use a general equilibrium model to study how the market power and organizational form of banks interacts with the coordination problem arising from externalities in economic activity. If externalities are positive, bank market power severely reduces social welfare by exacerbating this coordination problem, especially in marginal economies where individuals may “opt out” of the formal economy. However, this effect of bank market power may be eliminated if banks adopt a cooperative ownership form and increases social welfare if externalities are sufficiently negative. We also show how “redlining” may arise in marginal economies and provide testable predictions and policy implications.

A Theory of Entrepreneurial and Managerial Services: Revisiting Penrose from an Agency Perspective

Using a parsimonious principal-agent model, this paper builds a theory of how responsibility for entrepreneurial and managerial services should be allocated among managers within a firm. The paper offers an alternative explanation for the Penrose effect, whereby firm growth is said to be retarded by the time required to assimilate new managers. The paper shows a combination of moral hazard and causal ambiguity can similarly retard firm growth.