Decomposing the Finance Wage Premium: Contributions of ICT and Risk

Burak Uras, Jose Gabriel Carreno, Harry Huizinga and Ata Bertay
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Jose Gabriel Carreno: Central Bank of Chile, https://josegabocarreno.com

No 2026_105, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: "On average wages in the finance industry are higher compared to the rest of the economy. Two explanations suggested for this finance wage premium are (1) the positive correlation between risk-taking and wages, and (2) industry differences in ICT intensity. Using a comprehensive worker-firm panel dataset for the Netherlands, we estimate wage models with additive worker and firm fixed effects, and estimate the finance wage premium as the average of the firm fixed effects in an industry. We then relate the estimated cross-section of firm fixed effects to a range of firm charac- teristics, and find that ICT investment, the average level of educational attainment at a firm and the complementarity of the two are the main drivers of the finance wage premium, while firm risk only makes a small contribution."

Keywords: finance wage premium; worker-firm panels; ICT; firm risk (search for similar items in EconPapers)
JEL-codes: J24 J31 (search for similar items in EconPapers)
Pages: 60
Date: 2026-02-13
New Economics Papers: this item is included in nep-bec, nep-ict and nep-lma
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