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Finance and the Misallocation of Scientific, Engineering and Mathematical Talent

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  • Giovanni Marin

    (University of Urbino "Carlo Bo"; SEEDS, Ferrara, Italy.)

  • Francesco Vona

    (OFCE, Sciences Po Paris, France)

Abstract

The US financial sector has become a magnet for the brightest graduates in the science, technology, engineering and mathematical fields (STEM). We provide quantitative bases for this well-known fact and illustrate its consequences for the productivity growth in other sectors over the period 1980-2014. First, we find that the share of STEM talents grew significantly faster in finance than in other key STEM sectors such as high-tech, and this divergent pattern has been more evident for STEM than for general skills and more pronounced for investment banking. Second, this trend did not reverse after the Great Recession, and a persistent wage premium is found for STEM graduates working in finance and especially in typical financial jobs at the top of the wage distribution. Third, the brain drain of STEM talents into finance has been associated with a cumulative loss of labor productivity growth of 6.6% in the manufacturing sectors. Our results suggest that increasing the number of STEM graduates may not be enough to reignite sluggish economic growth without making their employment in finance more costly.

Suggested Citation

  • Giovanni Marin & Francesco Vona, 2017. "Finance and the Misallocation of Scientific, Engineering and Mathematical Talent," Documents de Travail de l'OFCE 2017-27, Observatoire Francais des Conjonctures Economiques (OFCE).
  • Handle: RePEc:fce:doctra:1727
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    2. Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto, 2019. "When complexity meets finance: a contribution to the study of the macroeconomic effects of complex financial systems," Greenwich Papers in Political Economy 23121, University of Greenwich, Greenwich Political Economy Research Centre.

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    More about this item

    Keywords

    Finance; skills; STEM workers; brain drain; productivity;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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