Growth of finance sucks skill from real economy, BIS paper warns

The BIS tower in Basel

The rapid growth of the financial sector sucks in skilled labour from other parts of the economy, harming aggregate productivity growth, a working paper published yesterday by the Bank for International Settlements (BIS) finds.

The paper, Why does financial sector growth crowd out real economic growth?, warns that while both finance and the real economy impose negative externalities on one another when they draw in skilled labour, if finance grows too far and too fast, the result is a negative i

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