Jennifer Lawrence and SIOE

By Ricard Gil

Let me first get out of the way whatever is crossing your mind right now. Jennifer Lawrence IS NOT attending SIOE next year and (to the best of my knowledge) she has not made public any statements that she will in the future. Sorry pal if I misled you for a second.

What Jennifer Lawrence has done and said that might be relevant for SIOE members and scholars generally interested in the study of institutional and organizational economics is that actresses are massively underpaid relatively speaking to their male counterparts. Make no mistake, Lawrence made $52 million in 2014 making her the best paid actress in the world, but yet this amount fell $28 million short of the best paid actor in the profession at the moment, Robert Downey Jr. You can search for this information and related news on the World Wide Web, and really start seeing that most of the top paid actors in the world get paid far more than actresses even though Lawrence herself gets paid more than the majority of actors. Then the question here is whether there is actual discrimination of pay against women in Hollywood, and the global motion picture industry for that matter.

Why does this matter to us at SIOE? Well, this comes back to ancient questions of how to compensate workers in scenarios that require of team work and where the marginal contribution of their work is not directly observed in the market place. What are the steps then that we would follow to determine whether such gender discrimination in motion picture production exists? Well, we may first want to ask whether Robert Downey Jr.’s movies make more money than Jennifer Lawrence’s movies. Is that so? If it is, how do the former outperform the latter? Is it on domestic box office? Is it on foreign box office? Is it merchandising? Is it ancillary markets such as video on demand or DVD sales? If difference in movie performance explains differences in pay (even partially), then movie goers may also be a bit at fault for the observed differences in pay between actors and actresses.

The next question that we want to ask is then whether movies that employ actresses in more relevant roles are fundamentally different than those that employ actors in more relevant roles. That is just asking, are actresses more likely to play secondary roles than actors? If the answer to the question is YES, then another question is whether the motion picture industry purposely produces movies that employ female characters in less relevant roles. If the answer to that is yet again YES, why is that? Is it demand driven? Is it a result of biases in studio executives?

Finally, there is a third question that I believe is what is the base of Ms. Lawrence’s statement. Holding constant movie performance, movie genre and cast gender composition, are actresses getting paid far less than their marginal contribution to movie performance relative to actors with the same marginal contribution to their movie performance. Here is where Alchian and Demsetz (1972) comes in and asks whether the institution of agency (characteristic of Hollywood) plays a role in this compensation gap. I do not quite have an answer for this, but this is certainly a topic of interest at SIOE. When talent gets paid less than its marginal contribution, it may be misallocated and directly affect efficiency. Who is going to write this paper?


FOOD FOR THOUGHT: A surprise appearance in the ranking of top world paid actresses is Chinese actress Fan Bingbing with $21 million last year, 4th best paid actress in the world. Two things may be contributing to this fact: one is of course her unique importance in a large booming market such as the Chinese movie industry, but the other may be that this actress is self-managed through her own production company.