Superstar (and Entrepreneurial) Engineers in Finance Jobs
56 Pages Posted: 13 Mar 2018 Last revised: 4 Jun 2018
Date Written: March 8, 2018
Does rapid wage growth in the financial sector in recent decades attract scarce talent to finance, thereby affecting talented workers’ long-term career paths? To study this question we focus on the careers of elite engineers, whose skills are in demand across the economy and who have the potential to become transformative entrepreneurs. Using plausibly exogenous variation in local financial sector growth, we compare U.S. engineering graduates from 12 top schools in the same graduating class and major, and show that engineers from higher ranked schools, and those with graduation honors, are more likely to switch from other sectors to finance. We find that financial sector growth attracts highly talented engineers into financial sector occupations that do not fully use their skills, which leads these engineers to engage in less innovative entrepreneurship in the long-run, compared to their classmates who remain in engineering. Our results are robust to alternative specifications, including a measure of geographic location based on engineers’ hometowns.
Keywords: Finance and labor; Talent allocation; Superstars; Human capital; Careers in finance; Financial sector growth; Entrepreneurship; Innovation
JEL Classification: G2, G20, J2, J3, J31, M52, N2
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