NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Skill Biased Financial Development: Education, Wages and Occupations in the U.S. Financial Sector

Thomas Philippon, Ariell Reshef

NBER Working Paper No. 13437
Issued in September 2007
NBER Program(s):   CF   DAE   EFG   LS

Over the past 60 years, the U.S. financial sector has grown from 2.3% to 7.7% of GDP. While the growth in the share of value added has been fairly linear, it hides a dramatic change in the composition of skills and occupations. In the early 1980s, the financial sector started paying higher wages and hiring more skilled individuals than the rest of economy. These trends reflect a shift away from low-skill jobs and towards market-oriented activities within the sector. Our evidence suggests that technological and financial innovations both played a role in this transformation. We also document an increase in relative wages, controlling for education, which partly reflects an increase in unemployment risk: Finance jobs used to be safer than other jobs in the private sector, but this is not longer the case.

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Document Object Identifier (DOI): 10.3386/w13437

Published: “Wages and Human Capital in the U.S. Financial Industry: 1909 - 2006,” with Ariell Reshef, Quarterly Journal of Economic s , November 2012

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