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Are Bankers Worth Their Pay? Evidence from a Talent Measure


Célérier, Claire Myriam; Vallee, Boris (2014). Are Bankers Worth Their Pay? Evidence from a Talent Measure. SSRN 2393110, University of Zurich.

Abstract

We empirically test the hypothesis that relatively high returns to talent explain the wage premium for working in finance. We exploit a specificity of the French educational system to build a precise measure of talent that we match with compensation data obtained from an educational elite. Using this measure, we show wage returns to talent to be three times higher in the finance industry than in the rest of the economy. This greater sensitivity to talent almost fully explains the level of the finance wage premium, its evolution since the 1980s, and, at the individual level, the pay increase workers obtain when joining the finance industry. Finally, talented workers receive a larger share of variable compensation, and even more so in the finance industry.

Abstract

We empirically test the hypothesis that relatively high returns to talent explain the wage premium for working in finance. We exploit a specificity of the French educational system to build a precise measure of talent that we match with compensation data obtained from an educational elite. Using this measure, we show wage returns to talent to be three times higher in the finance industry than in the rest of the economy. This greater sensitivity to talent almost fully explains the level of the finance wage premium, its evolution since the 1980s, and, at the individual level, the pay increase workers obtain when joining the finance industry. Finally, talented workers receive a larger share of variable compensation, and even more so in the finance industry.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:17 September 2014
Deposited On:23 Sep 2014 15:37
Last Modified:05 Apr 2016 18:22
Series Name:SSRN
Related URLs:http://ssrn.com/abstract=2393110
Other Identification Number:merlin-id:10092

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