The Financial Premium in the US Labor Market: A Distributional Analysis

43 Pages Posted: 27 Aug 2014

See all articles by Ken-Hou Lin

Ken-Hou Lin

University of Texas at Austin - Department of Sociology

Date Written: August 26, 2014

Abstract

Using both cross-sectional and panel data, this article revisits the evolution of the financial premium between 1970 and 2011 with a distributional approach. I report that above-market compensation was present in the finance sector in the 1970s, but concentrated mostly at the bottom of the earnings distribution. The financial premium observed since the 1980s, however, is largely driven by excessive compensation at the top, a development that increasingly contributes to the national concentration of earnings. Furthermore, the analysis suggests that the financial premium for top earners remained robust in the 2000s, when deregulation slowed down, and in the aftermath of the recent financial meltdown. These findings are inconsistent with the account that the earnings differential is driven by unobserved skill difference and demand shocks but supportive of the institutional account of rising inequality.

Suggested Citation

Lin, Ken-Hou, The Financial Premium in the US Labor Market: A Distributional Analysis (August 26, 2014). Available at SSRN: https://ssrn.com/abstract=2487257 or http://dx.doi.org/10.2139/ssrn.2487257

Ken-Hou Lin (Contact Author)

University of Texas at Austin - Department of Sociology ( email )

Austin, TX
United States

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