NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wages and Human Capital in the U.S. Financial Industry: 1909-2006

Thomas Philippon, Ariell Reshef

NBER Working Paper No. 14644
Issued in January 2009
NBER Program(s):   AP   CF   EFG   LS

We use detailed information about wages, education and occupations to shed light on the evolution of the U.S. financial sector over the past century. We uncover a set of new, interrelated stylized facts: financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We investigate the determinants of this evolution and find that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis also shows that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period we estimate that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.

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Document Object Identifier (DOI): 10.3386/w14644

Published: The Quarterly Journal of Economics (2012) doi: 10.1093/qje/qjs030 First published online: October 9, 2012

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