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

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  • Hamid Boustanifar
  • Everett Grant
  • Ariell Reshef

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\".

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  • Hamid Boustanifar & Everett Grant & Ariell Reshef, 2016. "Wages and human capital in finance: international evidence, 1970-2005," Globalization Institute Working Papers 266, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:266
    DOI: 10.24149/gwp266
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    3. Marin, Giovanni & Vona, Francesco, 2023. "Finance and the reallocation of scientific, engineering and mathematical talent," Research Policy, Elsevier, vol. 52(5).
    4. repec:hal:spmain:info:hdl:2441/510i09nqpa8gfpt7na72sknq4q is not listed on IDEAS
    5. Andrew Ellul & Marco Pagano & Annalisa Scognamiglio, 2020. "Careers in Finance," EIEF Working Papers Series 2007, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2021.
    6. Matthias Efing & Harald Hau & Patrick Kampkötter & Jean-Charles Rochet & Itay Goldstein, 2023. "Bank Bonus Pay as a Risk Sharing Contract," The Review of Financial Studies, Society for Financial Studies, vol. 36(1), pages 235-280.
    7. 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).
    8. Asano, Koji, 2024. "Managing financial expertise," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 351-365.
    9. Jen-Wen Chang & Simpson Zhang, 2018. "Competitive Pay and Excessive Manager Risk-taking," Working Papers 18-02, Office of Financial Research, US Department of the Treasury.
    10. 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.
    11. Julia Tanndal & Daniel Waldenström, 2018. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," Economica, London School of Economics and Political Science, vol. 85(338), pages 232-265, April.
    12. Arabela ICHIM & Mihaela NECULITA & Daniela Ancuta SARPE, 2018. "Drivers and consequences of income inequality," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 208-214.
    13. 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.
    14. Nolan, Brian & Richiardi, Matteo & Valenzuela, Luis, 2018. "The Drivers of Inequality in Rich Countries," MPRA Paper 89806, University Library of Munich, Germany.
    15. Lutz G. Arnold & Sebastian Zelzner, 2020. "Welfare Effects of the Allocation of Talent to Financial Trading: What Does the Grossman-Stiglitz Model Say?," Working Papers 190, Bavarian Graduate Program in Economics (BGPE).
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    18. Francesco D'Acunto & Laurent Frésard, 2018. "Finance, Talent Allocation, and Growth," CESifo Working Paper Series 6883, CESifo.

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    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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