Decomposing the Finance Wage Premium: Contributions of ICT and Risk

46 Pages Posted: 17 Sep 2024

See all articles by Ata Can Bertay

Ata Can Bertay

Sabanci University

Jose Carreño

Tilburg University - Center for Economic Research (CentER), Students

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Burak Uras

Tilburg University

Nate Vellekoop

Williams College - Department of Economics; University of Toronto

Abstract

Wages in the finance industry are on average higher compared to the rest of the economy. Two prominent explanations suggested for this finance wage premium are the positive correlation between risk-taking and wages, and industry differences inICT intensity. Using a comprehensive worker-firm panel for the Netherlands, we estimate wage models with additive worker and firm fixed-effects. Including firm fixed-effects corrects for an otherwise downward bias in the estimated finance wage premium. We then relate the cross-section of firm fixed-effects to a range of firm characteristics, and find that ICT investment, the average level of human capital at a firm and the complementarity of the two are the main drivers of the finance wage premium, while firm risk makes only a small contribution.

Keywords: finance wage premium, worker-firm panels, ICT, firm risk

Suggested Citation

Bertay, Ata Can and Carreño, Jose and Huizinga, Harry and Uras, Burak and Vellekoop, Nathanael, Decomposing the Finance Wage Premium: Contributions of ICT and Risk. Available at SSRN: https://ssrn.com/abstract=4959476 or http://dx.doi.org/10.2139/ssrn.4959476

Ata Can Bertay

Sabanci University ( email )

School of Management
Orhanli Tuzla
İstanbul, 34956
Turkey

Jose Carreño

Tilburg University - Center for Economic Research (CentER), Students ( email )

Tilburg
Netherlands

Harry Huizinga (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Burak Uras

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Nathanael Vellekoop

Williams College - Department of Economics ( email )

Schapiro Hall
24 Hopkins Drive
Williamstown, MA 01267
United States

University of Toronto ( email )

Max Gluskin House
150 St George st
Toronto, Ontario M5S 3G7
Canada

HOME PAGE: http://www.nvellekoop.nl

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