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Helena Vieira

June 27th, 2017

Why do bankers earn so much more than other professionals?

0 comments | 2 shares

Estimated reading time: 5 minutes

Helena Vieira

June 27th, 2017

Why do bankers earn so much more than other professionals?

0 comments | 2 shares

Estimated reading time: 5 minutes

Are bankers overpaid? Do they have special qualities that make them deserve to earn more than other professionals? In this video interview, LSE professor Ulf Axelson explores why pay is so high on Wall Street relative to normal jobs.

Here is part of his answer: “(It’s) due to a combination of two characteristics of many of the types of jobs you have on Wall Street. One is that it’s very hard to see what exactly people are doing, in the sense of ‘are they putting in the right effort?’ That’s what we call the moral hazard problem. The other thing is that in the finance industry it’s very efficient for one person to handle a lot of money.”

Professor Axelson spoke with Tom Kirchmaier, of the LSE Financial Markets Group (FMG) in March 2016.

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Notes:

  • This interview is based on the interviewee’s paper Wall Street Occupations, co-written with Philip Bond, in The Journal of Finance, Volume LXX, number 5, October 2015.
  • The post gives the views of its author, not the position of LSE Business Review or the London School of Economics.
  • Featured image credit: Wall Street, by Luisen Rodrigo, under a CC-BY-2.0 licence
  • Before commenting, please read our Comment Policy.

Ulf Axelson is the Abraaj Group Professor in Finance and Private Equity at LSE. He was the director of the Financial Markets Group (FMG), the main research and outreach centre in finance at the LSE.  Since 2010, he is the inaugural director of the MSc in Finance and Private Equity program. Previously, he was an Associate Professor of Finance at the Stockholm School of Economics, and before that an Assistant Professor of Finance at the Graduate School of Business of the University of Chicago. He received his Ph.D. in Financial Economics from Carnegie Mellon University and holds an MBA from the Stockholm School of Economics. Professor Axelson’s research lies within the fields of private equity, financial innovation and security design, corporate finance, auction theory, and financial intermediation. He has won a number of awards, including the Brattle Group Distinguished Paper Prize in 2015 for the paper discussed in this interview.

 

tom kirchmaierTom Kirchmaier is a Researcher in LSE’s Financial Markets Group (FMG) and Deputy Director of Corporate Governance at LSE. He is interested in using large firm-level datasets (Big Data) in improving the productivity and effectiveness of firms (both financial and non-financial) and other public organisations, and to provide practical use cases to operationalise his findings. Datasets he currently exploit are on policing, corporate boards, automotive supply chains, retail, and pricing.

 

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Helena Vieira

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