"Since You're So Rich, You Must Be Really Smart": Talent and the Finance Wage Premium
Working Paper Author/Authors
Abstract
Financial sector wages increased extraordinarily over the last decades. An explanation for this trend is that skill demand rose more in finance than other sectors. We use Swedish administrative data, which include cognitive and non-cognitive ability, as well as U.S. data, to examine talent allocation and relative wages in the financial sector. We find no evidence that talent in finance improved, neither on average nor at the top. A changing composition or return to talent cannot account for the surging wage premium. Our findings alleviate concerns about a brain drain, but indicate that finance workers capture rising rents over time.
© Michael Böhm, Daniel Metzger, Per Strömberg, 2018
All rights reserved. Distributed for discussion purposes only; not to be reproduced without permission.
The views expressed are those of the author(s) and do not necessarily reflect those of ECGI or its members.
For copyright queries or takedown requests, contact wp@ecgi.org.
