Compensation in the Financial Sector: Are all Bankers Superstars? (Celerier C.)

Bank Managers

Abstract Based on a survey among French engineers, I find that employees in the financial sector are highly paid. I also find large pay differences within the sector and that a large share of compensation is variable. I develop a model in which firms compete for industry-specific talent. The latter is either revealed or acquired on the job. As in Tervio (2009), I find that the limited ability of workers to pay while entering the industry leads to excessive rents in the sector. This model has empirical implications concerning wages, rm size per employee and career dynamics. First, the variance and skewness of wages are high and increase over the career. Second, returns to seniority are large and there is persistence in career in the sector. Third, wages can be explained by size effects. I test these implications and find that the premium in the financial sector may be explained by a higher sensitivity to industry-specific talent.
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Libref/ Celerier C. (2011) "Compensation in the Financial Sector: Are all Bankers Superstars?", International Conference of the French Finance Association (AFFI), May 2011, pp. 1 - 45
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