Superstar Phenomenon Research Articles

State Taxation of Nonresident Income and the Location of Work

Prior studies show that taxes matter for the residential locations of high-income earners. But states raise a significant share of revenue from nonresidents. Using variation in state tax rates, we provide causal evidence on the effect of the net-of-tax rate on the location of labor supply for professional golfers. State taxes induce high-income earners to shift employment to low-tax states without a residence change. The elasticity of working in a state is 0.34 and, consistent with the superstar phenomenon, increases with earnings. Our results suggest a novel margin of mobility responses for top earners: the spatial relocation of labor supply by nonresidents. (JEL H71, H73, J22, J44, J61, R23, Z22)

The Superstar Phenomenon Within a Digitized Economy: Theories, Causes, and Case Studies Surrounding the Entertainment Industry and Beyond


 
 
 
 The primary focus of this writing is to examine a structural wage distribution approach across several entertainment industries and within the corporate structure – in the fields of sports and music and top executives in businesses. Given the digitization of the modern economy – an ongoing transition drastically changing purchasing and consuming behaviors – viewership has become more accessible to a broader audience. Nonetheless, this form of convenience and publicity also exacerbates a more profound economic scenario that televised celebrities, especially entertainers like athletes, artists, and musicians, experience: the superstar phenomenon, or the concentration of high wages attributed to a small group of earners when compared to others within the same business. This condition alludes to the notions of opportunity cost, willingness to compete, incentives and disincentives, marginal costs, scarcity rent, imperfect substitution, and the extreme value theory that assesses how different professions may be experiencing elements of the phenomenon that affect the outcome of industry structures and economic well-being. From these observations, a question arises: what economic factors contribute to the magnification of pay disparity to create the superstar phenomenon, and how does this effect permeate and reflect different industries' pay structure gaps? Upon analysis, the cause seems to deter from the metric of pure skill or talent evaluation but instead focuses on individuals' marketability, attractiveness, irreplaceability, and influence, offsetting the direct correlation of statistical performance to payroll. 
 Furthermore, the ability to mass replicate performances and scarcity in handling top managerial responsibilities for entertainers and executives, respectively, exaggerates consumers' biases in focusing on the victor or leader. In other cases, one's ability to acquire superstardom derives from obtaining endorsements and sponsorships in the case of athletes and musicians and 
 
 
 
 
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 reputability within businesses to form superstar firms. Lastly, it is integral to note that beyond reputation and its structural advantages in pay, a psychological advantage also emerges, particularly within individual athletics, where opponents facing a superstar feel intimidation and showcase sub-par performances. In turn, superstars experience more favorable outcomes, a cyclical advantage that yields more award money, attention, and brand deals. Thus, the trends within the phenomenon, both in group and singular, entertainment and corporate settings will play an analytical role when stakeholders assess an individual or a firm's profitability. The phenomenon also draws on financial distribution shifts as the economy digitizes and concentrates on the elite percentage of income earners. This, however, creates a widening margin between the superstars and the rest while having side effects of pushing workers positioned lower in the industry's ladder out of the market, exacerbating inequality, particularly within entertainment industries (Koenig, 2017). By looking at statistics in pay distributions and using the aforementioned economic principles, this paper will provide a comprehensive theoretical analysis exploring the origins and justifications of the superstar phenomenon. 
 
 
 

Cascades in capacity constrained agents.

Many sorts of contagious phenomenon, such as music, do not exist in isolation but as part of a competitive marketplace. In these settings there are often superstars with out-sized popularity along with a large number of flops with little popularity. It could be the case that superstars are more popular because they are higher quality but I suggest that capacity constraints may be a structural factor that influences these disparities. In this agent-based model, there are multiple potentially cascading states that the agent can potentially occupy. The agents have a certain capacity of states that they can occupy at once. For example, suppose someone has a workout playlist that lasts 1 hour. As they discover new music to add to the playlist, they have to remove songs currently in the playlist to keep the playlist 1 hour. Thus, in this setting, the states indirectly trade off with each other by virtue of the capacity constraint. The key question is whether the indirect trade offs imposed by the capacity constraint are enough to induce disparities in popularity, even when the states are otherwise identical. I find that increasing the number of states in excess of capacity increases the disparities between popular and unpopular states. This suggests that capacity constraints may be a structural factor in explaining market concentration and superstar phenomenon.

A Bayesian look at American academic wages: From wage dispersion to wage compression

OECD countries have experienced a large increase in top wage inequality. Atkinson (2008) attributes this phenomena to the superstar theory leading to a Pareto tail in the wage distribution with a low Pareto coefficient. Do we observe a similar phenomena for academic wages? We examine wage formation in a public US university using for each academic rank a hybrid mixture formed by a lognormal distribution for regular wages and a Pareto distribution for top wages, using a Bayesian approach. The presence of superstars wages would imply a higher dispersion in the Pareto tail than in the lognormal body. We concluded that academic wages are formed in a different way than other top wages. There is an effort to propose competitive wages to some young Assistant Professors. But when climbing up the wage ladder, we found a phenomenon of wage compression which is just the contrary of a superstar phenomenon.

The Effect of Taxes on Where Superstars Work

Prior studies show that taxes matter for the residential locations of high-income earners. But, states raise a significant share of revenue from nonresidents, especially superstars. Using superstar athletes and variation in state tax rates, we provide causal evidence on the effect of the net-of-participation tax rate on the location of labor supply. State taxes induce high-income earners to shift employment contracts to low-tax states. The elasticity of working in a state is 0.32, and consistent with superstar phenomenon, increases with earnings. Our results suggest a novel margin of mobility responses for top-earners: the spatial relocation of labor supply by nonresidents.

The economics of social media (super-)stars: an empirical investigation of stardom and success on YouTube

ABSTRACT A new type of superstars developed with the rise of social media markets: social media superstars (SMS). The economic literature on the superstar phenomenon provides empirical evidence on different types of stars, above all athletes and musicians. This paper presents the first empirical work on SMS with original data from YouTube. Using various econometric techniques, we analyze a unique sample of 200 YouTube stars out of four different video categories to shed light on this new phenomenon. Beyond applying classic economic concepts on superstars by Rosen, MacDonald, and Adler, we contribute to extending the literature toward attention economics and the concepts of audience building (audience attraction and maintenance). In our empirical analysis, we find evidence supporting an inverse U-shape influence of upload frequency on the success of SMS. Moreover, we find empirical evidence that the duration and experience in the market have a significant influence on social media success. Eventually, we derive implications for superstar theory, SMS management, service providers, and advertisers.

The Taxation of Superstars*

Abstract How are optimal taxes affected by superstar phenomena? To answer this question, we extend the Mirrlees model to incorporate an assignment problem in the labor market that generates superstar effects. Perhaps surprisingly, rather than providing a rationale for higher taxes, we show that superstar effects provide a force for lower marginal taxes conditional on the observed distribution of earnings. Superstar effects make the earnings schedule convex, which increases the responsiveness of individual earnings to tax changes. We show that various common elasticity measures must be adjusted upward in optimal tax formulas. Finally, we study a comparative static that does not keep the observed earnings distribution fixed: when superstar technologies are introduced, inequality increases but we obtain a neutrality result, finding optimal taxes unaltered.

When the crowd evaluates soccer players’ market values: Accuracy and evaluation attributes of an online community

Evaluating the value of athletes to determine whether they should be transferred from one club to another has become a major challenge for managers of sports teams. In the context of German soccer, aficionados have built a large online community that evaluates professional soccer players’ market values. The community has become the main source for reporting market values in the media and has a strong impact on sports economy: it is used in real market transactions and wage negotiations, indicating the power of crowd wisdom in the sports management context.This research describes the evaluation process of the community, investigates the accuracy of its estimated market values, and shows which attributes are most important for market-value evaluations. After demonstrating that the community's market-value estimates can predict actual transfer fees, we show that community evaluations can largely be explained by an econometric model that contains two blocks of determinants: variables that are directly related to players’ talent and variables that result from judgments by external sources (e.g., journalists). Reorganizing variables that were used in previous studies into two blocks (talent vs. external determinants) provides a more differentiated look at the popularity of players than recent literature on the “superstar phenomenon.”

A Model of Progressive Employee Compensation and Superstardom

This paper identifies the condition leading to a progressive salary situation wherein the elasticity of compensation with respect to ability is greater than unity, i.e., a small percentage advantage in ability results in a disproportional increase in compensation. This analysis also helps explain the “superstar phenomenon” made famous by Rosen (1981). Two assumptions are made. The first is that there is a generalized Cobb-Douglas type of production function wherein different hierarchies of employees of different abilities are viewed as distinct inputs. The second is that the distribution of ability is bell-shaped or approximately normally distributed, and can be approximated by a Poisson distribution. The model is applied using average outgoing salaries of MBA students from different universities compared to their average test scores.

Search, Design, and Market Structure

The Internet has made consumer search easier, with consequences for prices, industry structure, and the kinds of products offered. We provide an industry model with strategic design choices that explores these issues. A polarized market structure results: some firms choose designs aimed at broad-based audiences, while others target narrow niches. We analyze the effect of reduced search costs, finding results consistent with the reported prevalence of niche goods and long-tail and superstar phenomena. In particular, the model suggests that long-tail effects arise when there is a wide range of potential designs, relative to vertical heterogeneity among firms. JEL: D11, D21, D83, L11, L86, M31

Online user reviews, product variety, and the long tail: An empirical investigation on online software downloads

Our study examines the impact of both a demand side factor (online user reviews) and a supply side factor (product variety) on the long tail and superstar phenomena in the context of online software downloading. The descriptive analysis suggests a significant superstar download pattern and also the emergence of the long tail. Using the quantile regression technique, we find the significant interaction effect between online user reviews and product variety on software download. We find that the impacts of both positive and negative user reviews are weakened as product variety goes up. In addition, the increase in product variety reduces the impact of user reviews on popular products more than it does on niche products. After taking the interaction effect into account, we find that the overall impact of the increased product variety helps niche products to get more downloads. These results highlight the importance of considering the intricate interplay between demand side and supply side factors in the long tail and online word-of-mouth research.

The superstar phenomenon in the knowledge management and intellectual capital academic discipline

This paper reports on the first documented attempt to investigate the presence of the superstar (or Matthew) effect in the knowledge management and intellectual capital (KM/IC) scholarly discipline. The Yule–Simon model and Lotka's square law were applied to the publication data obtained from 2175 articles from 11 KM/IC journals. Based on the findings, it was concluded that the KM/IC discipline represents a very young, attractive academic field that welcomes contributions from a variety of academics and practitioners. In their paper acceptance decisions, KM/IC journal editors are not biased towards a small group of highly productive researchers, which is a positive sign that the field has been progressing in the right direction. The discipline is driven more by academics than by practitioners, and the distribution of articles is more concentrated among a few academic but not practitioner institutions. It was also observed that the Yule–Simon model and Lotka's square law may produce different distributions with respect to institutions.

Search, Design and Market Structure

The Internet has made consumer search much easier with consequences for competition, industry structure and product offerings. We explore these consequences in a rich but tractable model that allows for strategic design choices. We find a polarized market structure, where some firms choose designs aiming for broad-based audiences, while others target narrow niches. Such an industry structure can arise even when all firms and consumers are ex-ante identical. We perform comparative statics and show the effect of a fall in search costs on the designs, market shares, prices, and profits of different firms. In particular, a fall in search costs, through the effect on product designs, can lead to higher industry prices and profits. In characterizing sales distributions, our analysis is related to discussions of how the Internet has led to the prevalence of niche goods and the long tail and superstar phenomena.

Superstars, Winner-Take-All Markets and Economic Growth

This paper argues that the “superstar” phenomenon, as a natural outcome of features of knowledge-based products, has important relevance for - and has so far been overlooked by - endogenous growth theory. By modelling superstar phenomena as outcomes of winnertake-all contests in an innovation-driven endogenous growth model, where productivity growth as well as the structures of the winner-takeall contests are jointly determined, this paper provides a framework that simultaneously accounts for changes in income disparity observed in recent decades, the rise of the superstar phenomenon, the intensification of winner-take-all contests, and the “paradox of happiness”.

Les très hauts revenus des Superstars du sport. Un état des approches théoriques et empiriques

La littérature économique qualifie de phénomène Superstar la situation où un petit nombre d’individus bénéficient de revenus considérables et captent des parts de marché prépondérantes dans leur activité. Deux entrées théoriques sont privilégiées en raison de leur pouvoir explicatif complémentaire de ce double biais. La théorie des Superstars montre que l’inégalité des rémunérations et la concentration de la demande proviennent certes des écarts de talent, mais plus encore du mode de valorisation de ces écarts qui prévaut à un moment donné. La théorie du tournoi met en lumière le double problème qui caractérise le spectacle sportif : celui de l’aléa moral (comment améliorer les performances?), celui de l’anti-sélection (comment trier les meilleurs talents ?). Aussi, l’incitation financière est-elle utilisée fortement pour réduire ces deux risques et promouvoir la qualité et l’incertitude du résultat. Les études empiriques éclairent ces sources d’hétérogénéité des rémunérations et confirment le lien entre ces effets de grossissement des talents propres au star-system dans le sport et la formation des revenus des Superstars.

What Does it Take to be a Star? – The Role of Performance and the Media for German Soccer Players

Abstract We test existing superstar theories for the German soccer league. We use various measures for individual players' performance and media presence to analyze whether performance and popularity can explain salaries and superstars in soccer. Moreover, we argue that quantile regression technique should be applied to analyze superstar phenomena instead of OLS used hitherto.

Concert Tour Success in North America: An Examination of the Top 100 Tours from 1997 to 2005

Radio airplay, album sales and concerts provide revenues to songwriters, music labels, and musicians. From 1997 to 2005, concert revenues in North America increased from $1.3 billion to $3.1 billion. We analyze concert trends by investigating pricing and attendance, the superstar phenomenon, and structural changes in the way the concert tour industry operates. To conduct this analysis we look at the performance of the top 100 tours from 1997 to 2005. These data comprise a chart of sorts—an annual review of the performance of the concert industry, with performers being ranked in terms of gross concert revenues.

Multi‐Stage Markets in the Recording Industry

Theories of superstardom propose that historic market success may be a predictor of future success. Music labels have an incentive to concentrate on a few “star” performers, thereby exploiting economies of scale (particularly in the realm of marketing) that have been made possible by developments in recording and multi‐media technologies. Our paper focuses on the role that the success of artists in selling singles has in leading to disproportionately greater successes in the sales of albums. More specifically, we test MacDonald's hypothesis of multi‐market filtering whereby the less expensive singles market acts as a quality filter for the more expensive albums market. Under reasonable assumptions, multi‐market processes can produce the superstar phenomenon. Because such filtering may be imperfect, we also examine the role of gender, race, musical entities (solo, duo, group), and career duration in determining artists' successes. Our main results are re‐estimated so as to capture recent changes such as digital recording piracy and downloading.

Survival in the UK Market for Popular Music: An Alternative Test of Superstar Theory

Regardless of why and how Superstars come to exist, the relationship between talent and success in the performing arts is described as a phenomenon wherein relatively small numbers of people earn enormous amounts of money and dominate the activities in which they engage, Nevertheless, the literature is split between two schools of thought concerning the true model of consumer choice that yields the Superstar phenomenon. Whilst Rosen (1981) and McDonald (1988) believe superstardom arises from perfectly observable differences in artist talent, Adler (1985) suggests that this latter condition is not necessary. Superstardom may be the result of a stochastic process that becomes a self-perpetuating device for consumers to economise on the cost of acquiring knowledge, or capital. This paper fills a void in the empirical literature by using a duration model to test if an explicit link exists between the cost of consumption capital and artist chart survival, as suggested by Adler (1985).

Models of Superstardom: An Application of the Lotka and Yule Distributions

One common measure of success for popular recording artists is the receipt of gold or platinum sales awards. With regard to singles—the focus of this study—a gold award signifies sales of 1 million copies, whereas a platinum award signifies sales of 2 million copies (Recording Industry Association of America). A simple ranking of artists by the number of gold and platinum singles awarded demonstrates that relatively few artists have a great many awards, and that many artists have a few awards (see Tables 1 and 2). This skewness in success is often viewed as evidence of the superstar phenomenon. The superstar phenomenon is proposed to occur in occupations where personal rewards are closely associated with market size, and where, according to Rosen, there is “a strong tendency for both market size and reward to be skewed toward the most talented people in the activity” (845). In the next section we examine theories relating to superstardom. We then introduce two laws of scattering (namely those laws proposed by Lotka and Yule) that may be used to explain differences in success among music performers. We then test these theories against data collected for gold and platinum singles for 1958–2001. The paper concludes with a discussion of our findings.