Rapid earnings growth in finance concentrates top earnings in a few large cities

Abstract

Since the 1980s, disproportionate top earnings growth in large cities has fueled a resurgence in the spatial concentration of top earnings across countries in the global north. Research attributes this trend to national top earnings growth or globalization but has left unanswered how national and local top earnings growth coincide and why this phenomenon occurs in cities less central to the global economy. Here we show that earnings growth in finance since the 1980s has concentrated top earnings in the few cities where financial market jobs cluster. Using administrative linked employer–employee data for ten countries in the global north from 1989 to 2019, we show that this pattern extends beyond major global cities to smaller financial cities. Comparing financial cities with similar domestic cities shows that this contribution is not just a byproduct of scale or urban growth. We thus emphasize the role of urban sectoral specialization and the labor markets within these sectors in driving the spatial concentration of top earnings. Earnings growth in the financial sector concentrates top incomes in specific cities, not only in major global hubs. Using administrative data from ten countries, the authors show that finance accounts for 26–50% of top earnings concentration, driven by rent-sharing in financial markets.