What Drives the Finance Academia Wage Premium?

By: Claire Célérier, Boris Vallée and Alexey Vasilenko

Format:Print
| Language:English

Abstract

This paper documents the existence of a significant wage finance premium in academia, and investigates its underlying mechanism. By exploiting an extensive dataset covering wages, publications and socio-demographics for 60,000 public-university faculty from all fields, we first document a wage premium that amounts to close to 50% for finance professors. We then show that finance-faculty wages are significantly more sensitive to students' future compensation than in other fields, which suggests that the academic premium results spillover from the industry. Non-exclusive channels for such spillover supported by the data are an imbalance between student demand for finance majors and the supply of finance PhD graduates, more donations originating from this industry, and the importance of student wages in business school rankings, all resulting in higher university revenues per finance faculty. By contrast to the industry, we find no evidence of high returns to talent compared to the other fields.