Exporting the winner-take-all economy: micro-level evidence on the impact of US investors on executive pay in the United Kingdom

Existing studies of the political determinants of top incomes and inequality tend to focus on developments within individual countries, neglecting the role of potential interdependencies that transcend national borders. This article argues that the sharp rises in top incomes around the world in recent years are in part a product of specific features of the US political economy, which were subsequently exported to other economies through the global expansion of US-based financial investors. To test the argument, we collect fine-grained micro-level data on executive pay and firm ownership structures for a comprehensive sample of publicly listed firms in the United Kingdom (UK). Our analyses uncover robust evidence that the Americanization of UK firm ownership leads to sizable pay increases for high-level managers at those firms. Scrutinizing the causal mechanisms underlying this effect, we find them to be more consistent with changes in executive bargaining power than market-related factors such as skills premia or better corporate performance. The findings have important implications for the literature on the international political economy of inequality.