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

47 Pages Posted: 24 Sep 2007 Last revised: 20 Sep 2010

See all articles by Thomas Philippon

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Ariell Reshef

Paris School of Economics (PSE); CNRS; Université Paris I Panthéon-Sorbonne - CES/CNRS; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

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Date Written: September 2007

Abstract

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.

Suggested Citation

Philippon, Thomas and Reshef, Ariell, Skill Biased Financial Development: Education, Wages and Occupations in the U.S. Financial Sector (September 2007). NBER Working Paper No. w13437. Available at SSRN: https://ssrn.com/abstract=1016348

Thomas Philippon (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Ariell Reshef

Paris School of Economics (PSE) ( email )

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Paris, 75014 75014
France

CNRS ( email )

France

Université Paris I Panthéon-Sorbonne - CES/CNRS ( email )

106 bv de l'Hôpital
Paris, 75013
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

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