Working Paper: CEPR ID: DP14767
Authors: Andrew Ellul; Marco Pagano; Annalisa Scognamiglio
Abstract: The finance wage premium since the 1990s has arguably lured talent away from other industries. However, the allocation of talent is likely to respond to differences in career paths, not in wages at a given date. We use resume data to reconstruct the careers of 11,255 professionals in finance, high-tech and services from 1980 to 2017, and find that careers mostly develop within sectors. Careers in asset management feature higher and steeper pay profiles than those of employees in banking, insurance and non-finance, yet this career premium cannot be explained by higher risk. Labor market entry responds positively to career premia in asset management and high-tech, and these sectors are regarded as substitutes by potential entrants, consistently with high-tech competing with asset management in attracting talent.
Keywords: careers; finance premium; asset management; labor market entry; high-tech
JEL Codes: G20; G23; J24; J62; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| entry decisions in finance (G12) | persistence of industry choices (L69) |
| career premia in finance (G19) | entry decisions in asset management (G11) |
| career premia in high-tech (J24) | entry decisions in high-tech (L63) |
| career premia in asset management (G11) | entry decisions in high-tech (L63) |
| career premia in asset management (G11) | entry decisions in services (L80) |
| attractiveness of asset management careers declines over time (G11) | talent allocation shifts (J62) |