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Rise of the 'Quants' in Financial Services: Regulation and Crowding Out of Routine Jobs

53 Pages Posted: 8 Aug 2018 Last revised: 28 Aug 2020

See all articles by Christos Makridis

Christos Makridis

Arizona State University (ASU) - W.P. Carey School of Business; The Gallup Organization; Stanford University - Stanford Institute for Human-Centered Artificial Intelligence; Institute for the Future (IFF), Department of Digital Innovation, School of Business, University of Nicosia

Alberto G. Rossi

Georgetown University - McDonough School of Business

Date Written: July 22, 2018

Abstract

We document three stylized facts regarding employment in financial services: (a) the share of science, technology, engineering, and math (STEM) workers grew by 30% between 2011 and 2017; (b) while the earnings premium of working in finance has grown, the STEM premium in finance has declined since 2011; and (c) regulatory restrictions in the financial services have grown faster than other sectors. We investigate three economic mechanisms underlying the employment patterns: (a) capital-skill complementarity, (b) relabeling of non-STEM into STEM degree programs, and (c) regulation. We show that only the rise in regulation can explain these joint dynamics.

Keywords: fintech, financial services, STEM workers, regulation, STEM

JEL Classification: G21, G23, G38, J23, J31

Suggested Citation

Makridis, Christos and Rossi, Alberto G., Rise of the 'Quants' in Financial Services: Regulation and Crowding Out of Routine Jobs (July 22, 2018). Available at SSRN: https://ssrn.com/abstract=3218031 or http://dx.doi.org/10.2139/ssrn.3218031

Christos Makridis (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

The Gallup Organization ( email )

Washington, DC 20004
United States

Stanford University - Stanford Institute for Human-Centered Artificial Intelligence ( email )

210 Panama St.
Cordura Hall
Stanford, CA 94305
United States

Institute for the Future (IFF), Department of Digital Innovation, School of Business, University of Nicosia ( email )

Nicosia, 2417
Cyprus

Alberto G. Rossi

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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