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Title: Superstar Earners and Market Size: Evidence from the Entertainment Industry
Citation Type: Conference Paper
Publication Year: 2017
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Abstract: "Superstar theory" argues that growth in top incomes is driven by a growth in market size. Despite the prominence of this superstar idea, there is no causal evidence for the effect of market size on top incomes. This paper makes use of a historical quasiexperiment to provide a causal test for “superstar effects”. The roll-out of television in the middle of the 20th century increases the size of the market an entertainer can serve. Signal interference of broadcasting signal gives rise to quasi-random variation in the location of television production. This allows me to estimate the causal effect of a market size enhancing technology on the wage distribution. I build a novel dataset that digitizes detailed entertainment industry records, information on the location of television and the entertainment market size. I link this to employment and wage records from the US census. The introduction of TV has a large and significant effects on the distribution of incomes. The number of entertainers in the top 1% of the income distribution doubles, while the market size increases more than 4-fold. The causal effect of market size on top earners is economically large and significant. At the same time the causal estimate are smaller than the OLS estimates. The estimates thus suggest that the correlation of top income and market size over states the role of superstar effects.
Url: http://conference.iza.org/conference_files/SUM_2017/koenig_f10098.pdf
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Authors: Koenig, Felix
Conference Name: 20th IZA Summer School in Labor Economics
Publisher Location: Buch/Ammersee, Germany
Data Collections: IPUMS USA - Ancestry Full Count Data
Topics: Labor Force and Occupational Structure
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