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

33 Pages Posted: 8 Aug 2018 Last revised: 19 Nov 2018

See all articles by Christos Makridis

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Michael Reher

University of California, San Diego (UCSD) - Rady School of Management

Date Written: July 22, 2018

Abstract

This paper documents a rise in high-technology workers in the financial services sector and finds evidence that financial regulation has contributed to this change in labor force composition. First, we show that the share of science, technology, engineering, and math (STEM) workers in finance has grown from 6.7% to 9.4% over the past decade, moderated by a 4.9% decline in their earnings premium. Moreover, the overall increase in STEM workers is heavily concentrated in metropolitan areas that have a higher finance employment share. Second, we estimate how financial regulation has affected the composition of jobs in financial services. Using data from QuantGov as well as a difference-in-difference estimator motivated by differential exposure to post-crisis regulatory reforms, we show that regulation increases the share of STEM workers and crowds out employment in more routine occupations.

Keywords: Fintech, Financial Services, High Tech Workers, Regulation, STEM

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

Suggested Citation

Makridis, Christos and Reher, Michael, 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)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Michael Reher

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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