Finance, Talent Allocation, and Growth

57 Pages Posted: 9 Apr 2018

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Laurent Frésard

University of Lugano; Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: February 15, 2018


The growing finance wage premium is related to a modest net reallocation of skilled workers from non-finance sectors into finance in a broad sample of 24 countries over 35 years. The reallocation is higher when the finance wage premium grows faster than the contribution of the financial sector to the economy, which we proxy with the relative value added of finance. More innovative sectors and sectors exhibiting lower labor-transition costs face a higher reallocation of skilled workers. Yet, the growing finance wage premium is unrelated to sectoral or aggregate growth, to countries’ innovative capacity, to student enrollment in STEM degrees, and to the riskiness, efficiency, and competitiveness of banking sectors. Overall, the reallocation of skilled labor implied by a growing finance wage premium appears too modest to materially affect economic growth.

Keywords: finance wage premium, skilled labor, misallocation, growth, innovation, banking sector

JEL Classification: D720, G200, J230, J310, N200

Suggested Citation

D'Acunto, Francesco and Frésard, Laurent, Finance, Talent Allocation, and Growth (February 15, 2018). CESifo Working Paper Series No. 6883, Available at SSRN:

Francesco D'Acunto (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Laurent Frésard

University of Lugano ( email )

Lugano, 900

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

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