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Wages and human capital in finance: international evidence, 1970-2005

Author

Listed:
  • Boustanifar, Hamid

    () (BI Norwegian Business School)

  • Grant, Everett

    (Federal Reserve Bank of Dallas)

  • Reshef, Ariell

    () (Paris 1 Sorbonne-Pantheon, CNRS and Paris School of Economics)

Abstract

We study the allocation and compensation of human capital in the finance industry in a set of developed economies in 1970-2005. Finance relative skill intensity and skilled wages generally increase but not in all countries, and to varying degrees. Skilled wages in finance account for 36% of increases in overall skill premia, although finance only accounts for 5.4% of skilled private sector employment, on average. Financial deregulation, financial globalization and bank concentration are the most important factors driving wages in finance. Differential investment in information and communication technology does not have causal explanatory power. High finance wages attract skilled international immigration to finance, raising concerns for "brain drain".

Suggested Citation

  • Boustanifar, Hamid & Grant, Everett & Reshef, Ariell, 2016. "Wages and human capital in finance: international evidence, 1970-2005," Globalization and Monetary Policy Institute Working Paper 266, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:266
    DOI: 10.24149/gwp266
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Thomas Philippon & Ariell Reshef, 2013. "An International Look at the Growth of Modern Finance," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 73-96, Spring.
    2. 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).
    3. Tanndal, Julia & Waldenström, Daniel, 2016. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," Working Paper Series, Center for Labor Studies 2016:2, Uppsala University, Department of Economics.
    4. Böhm, Michael & Metzger, Daniel & Strömberg, Per, 2015. "Since you’re so rich, you must be really smart”: Talent and the Finance Wage Premium," Working Paper Series 313, Sveriges Riksbank (Central Bank of Sweden).
    5. Tanndal, Julia & Waldenström, Daniel, 2016. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," Working Paper Series 1106, Research Institute of Industrial Economics.
    6. repec:pal:compes:v:60:y:2018:i:1:d:10.1057_s41294-017-0043-3 is not listed on IDEAS
    7. Olivier Godechot, 2015. "Financialization Is Marketization! : A Study on the Respective Impact of Various Dimensions of Financialization on the Increase in Global Inequality," Sciences Po publications 15/3, Sciences Po.
    8. Francesco D'Acunto & Laurent Frésard, 2018. "Finance, Talent Allocation, and Growth," CESifo Working Paper Series 6883, CESifo Group Munich.
    9. Tanndal, Julia & Waldenström, Daniel, 2016. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," IZA Discussion Papers 9684, Institute for the Study of Labor (IZA).
    10. Tanndal, Julia & Waldenström, Daniel, 2016. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," CEPR Discussion Papers 11094, C.E.P.R. Discussion Papers.
    11. Godechot, Olivier, 2015. "Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality," MaxPo Discussion Paper Series 15/3, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    12. Ugo Panizza, 2018. "Nonlinearities in the Relationship Between Finance and Growth," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 44-53, March.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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