The Growth of Finance is Not Remarkable

Journal of Financial and Quantitative Analysis, Forthcoming

Swedish House of Finance Research Paper No. 20-27

60 Pages Posted: 28 Oct 2020 Last revised: 13 Apr 2023

See all articles by James R. Brown

James R. Brown

Iowa State University - Department of Finance

Gustav Martinsson

Stockholm University - Stockholm Business School; Stockholm School of Economics - Stockholm School of Economics - Swedish House of Finance, Students; Royal Institute of Technology (KTH) - Department of Industrial Economics and Management (INDEK)

Bruce C. Petersen

Washington University in St. Louis

Date Written: March 9, 2022

Abstract

An important literature emphasizes that finance grew rapidly after WWII relative to the full economy and the services sector, but these are poor benchmarks because they mask a broad structural shift from low- to high-skill services. We show that: i) finance is among the most skill-intensive service industries, ii) the evolution of the finance income share closely tracks other high-skill service industries, and iii) finance grew slower than the rest of high-skill services in the post-WWII period. The rise of modern finance is not as remarkable as prior research suggests, providing context for debates about the size of finance.

Keywords: Growth of finance, Financial services, High-skill services, Finance wages, Securities trading, Other finance

JEL Classification: G20, J24, L8

Suggested Citation

Brown, James R. and Martinsson, Gustav and Petersen, Bruce, The Growth of Finance is Not Remarkable (March 9, 2022). Journal of Financial and Quantitative Analysis, Forthcoming , Swedish House of Finance Research Paper No. 20-27, Available at SSRN: https://ssrn.com/abstract=3712477 or http://dx.doi.org/10.2139/ssrn.3712477

James R. Brown (Contact Author)

Iowa State University - Department of Finance ( email )

Ivy College of Business
Ames, IA 50011
United States
5152944668 (Phone)

Gustav Martinsson

Stockholm University - Stockholm Business School

Albanovägen 18
House 2
Stockholm, 11419
Sweden

Stockholm School of Economics - Stockholm School of Economics - Swedish House of Finance, Students ( email )

111 60 Stockholm
Sweden

Royal Institute of Technology (KTH) - Department of Industrial Economics and Management (INDEK) ( email )

Stockholm, 100 44
Sweden

HOME PAGE: http://https://www.kth.se/profile/gusma

Bruce Petersen

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

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