Are Bankers Worth Their Pay? Evidence from a Talent Measure (PDF)
Source: Harvard Business School Working Papers
This paper investigates empirically the source of the wage premium in the finance industry. We exploit the ranking in a competitive examination to build a precise measure of talent. By using a comprehensive compensation survey among an educational elite, we show that wage returns to talent are relatively high in the finance industry. This higher sensitivity to talent explains both the finance wage premium and its evolution.