Wall Street Occupations

Ulf Axelson; Philip L. Bond

doi:10.1111/jofi.12244

Journal of Finance Vol. 70 No. 5 2015

Wall Street Occupations

Ulf Axelson^{1,2,3,4,5,6,7,8,9}; Philip L. Bond^{1,2,3,4,5,10,6,7,8,9}

¹ Goethe University Frankfurt · ² University of Minnesota · ³ Federal Reserve Bank of Minneapolis · ⁴ Cornell University · ⁵ Temple College · ⁶ Federal Reserve Bank of Philadelphia · ⁷ Carnegie Mellon University · ⁸ The University of Texas at Austin · ⁹ Michigan State University · ¹⁰ Bank of England

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Abstract

Many finance jobs entail the risk of large losses, and hard‐to‐monitor effort. We analyze the equilibrium consequences of these features in a model with optimal dynamic contracting. We show that finance jobs feature high compensation, up‐or‐out promotion, and long work hours, and are more attractive than other jobs. Moral hazard problems are exacerbated in booms, even though pay increases. Employees whose talent would be more valuable elsewhere can be lured into finance jobs, while the most talented employees might be unable to land these jobs because they are “too hard to manage.”

DOI: 10.1111/jofi.12244
Volume: 70
Issue: 5
Pages: 1949-1996
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Wall Street Occupations

Abstract

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