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Decomposing the Finance Wage Premium: Contributions of ICT and Risk

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Abstract

"On average wages in the finance industry are higher compared to the rest of the economy. Two explanations suggested for this finance wage premium are (1) the positive correlation between risk-taking and wages, and (2) industry differences in ICT intensity. Using a comprehensive worker-firm panel dataset for the Netherlands, we estimate wage models with additive worker and firm fixed effects, and estimate the finance wage premium as the average of the firm fixed effects in an industry. We then relate the estimated cross-section of firm fixed effects to a range of firm charac- teristics, and find that ICT investment, the average level of educational attainment at a firm and the complementarity of the two are the main drivers of the finance wage premium, while firm risk only makes a small contribution."

Suggested Citation

  • Burak Uras & Jose Gabriel Carreno & Harry Huizinga & Ata Can Bertay, 2026. "Decomposing the Finance Wage Premium: Contributions of ICT and Risk," Department of Economics Working Papers 2026_105, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:2026_105
    DOI: 10.36934/wecon:2026_105
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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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