Economics vs. Finance Ph.D.

A Ph.D. in economics and a Ph.D. in finance are both advanced degrees in the study of money. The difference between the two degrees is more one of emphasis than of a bright line contrast between two subject areas. The Ph.D. in economics is a research degree and prepares the student for economic research, often in some sort of think tank, or for teaching, usually in a university economics department. The graduate with a finance Ph.D. is more likely to work in the financial industry, dealing with the practical concerns of financial markets.

The two degrees have a lot in common, and graduate students in the two specializations share a lot of course work. Both heavily emphasize mathematics. In fact, according to Rossitza B. Wooster, an assistant professor of economics at Portland State University, if you don't have a Graduate Record Exam score of at least 800 in mathematics, you probably won't last through your first year. One good way of looking at the two degrees is that they are both doctorates in applied mathematics, but the economics doctorate emphasizes theory and the finance doctorate emphasizes the application of theory to financial markets and issues.

While the two degrees have similar course requirements, the dissertations reveal the differences between them. Finance dissertations from the Haas School of Business at the University of California at Berkeley are on leveraged buyouts and distressed asset pricing, consumer decisions and other relatively practical, market-oriented matters. Economics dissertations from Berkeley emphasize theory and are on such subjects as economic decision theory, microeconomic theory and public economics and development.

Finance Ph.D.s are generally paid more in the academic job market than Economics Ph.D.s. Mark Perry, a professor of both economics and finance at the University of Michigan, notes that in 2006, professors with Ph.D.s in finance had starting salaries averaging $110,000; professors with Ph.D.s in economics had starting salaries that same year averaging $71,900. The annual salary survey conducted by The Association to Advance Collegiate Schools of Business notes a similar disparity for the academic year 2013-14: Annual salaries for professors of finance, banking, real estate and insurance averaged $176,700, and annual salaries for professors of economics and managerial economics averaged $135,800.

Scott Jaschik, writing in Inside Higher Ed, notes that surveys by the National Science Foundation during the period 1997 to 2011 shows that the majority of Ph.D.s in economics held teaching jobs, but that the percentage of those teaching rather than entering government or the private sector declined slightly during the period. He also notes that the same study shows that teaching Ph.D.s earned less than those working in government or the private sector. Finance Ph.D.s, on the other hand, are more likely to go into government or the private sector, where, as Professor Wooster notes, they may make up to twice as much as a finance Ph.D. teaching at a university.