Journal of Corporate Finance Vol. 99 2026
Decomposing the finance wage premium: Contributions of technology and risk
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 information technology intensity. Using a comprehensive worker-firm panel dataset for the Netherlands, we estimate wage models with additive worker and firm fixed effects, and compute 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 characteristics, and find that information technology 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.
- DOI
- 10.1016/j.jcorpfin.2026.102980
- Volume
- 99
- Pages
- 102980
- Language
- en
- Sources
- openalex crossref