Returns to Managerial and Technical Competencies of IT Professionals: An Empirical Analysis

Abstract

In this study, we examine the effect of managerial and technical competencies of information technology (IT) professionals on their salaries. Based on a large nationally representative dataset of more than 55,000 IT professionals in the U.S. for the period 1999-2002, we find that both managerial and technical competencies have a significant effect on salaries of IT professionals. In contrast with findings of previous studies, we find that compared to firms in other industries, firms in the IT industry pay a significant amount of premium to IT professionals. Our results also show that IT professionals in the non-profit and governmental sector receive less compensation compared to their counterparts in the for-profit sectors of the economy. Similar to the dotcom effect for abnormal returns in stock markets, we observe a pronounced dotcom effect in salaries of IT professionals during the 1999-2002 period. Our findings provide evidence of pronounced wage inequalities on the basis of gender and male IT professionals receive 7.8% more in total compensation than their female counterparts. Finally, we estimate the causal effect of MBA education on the salaries of IT professionals using a matching estimator and demonstrate how bounding such a matching estimator provides an assessment of sensitivity of estimated causal effects with respect to selection due to unobservable factors.