Ups and downs in finance, ups without downs in inequality

Godechot, O. (Olivier); Neumann, N. (Nils); Apascaritei, P. (Paula); Boza, I. (István); Hällsten, M. (Martin); Henriksen, L.F. (Lasse Folke); Hermansen, A.S. (Are Skeie); Hou, F. (Feng); Jung, J. (Jiwook); Kodama, N. (Naomi); Krízková, A. (Alena); Lippényi, Z. (Zoltán); Elvira, M.M. (Marta María); Maja-Melzer, S. (Silvia); Mun, E. (Eunmi); Sabanci, H. (Halil); Soener, M. (Matthew); Thaning, M. (Max)

Keywords:

Inequality
Finance
Financial crisis
Regulation

Issue Date:

15-Jul-2022

Publisher:

Oxford University Press

Project:

340045 - SUSTAINABLEWORKFORCE - Investments in a sustainable workforce in Europe: causes and consequences in comparative perspective

Publisher Version:

https://academic.oup.com/ser/article/21/3/1601/6644998

ISSN:

1475-147X

Editorial note:

This is an open access article distributed under the terms of the Creative Commons CC BY license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Citation:

Godechot, O. (Olivier); Neumann, N. (Nils); Apascaritei, P. (Paula); et al. "Ups and downs in finance, ups without downs in inequality". Socio-economic review. 21 (3), 2022-07-15, 1849

Abstract

The upswing in finance in recent decades has led to rising inequality, but do downswings in finance lead to a symmetric decline in inequality? We analyze the asymmetry of the effect of ups and downs in finance, and the effect of increased capital requirements and the bonus cap on national earnings inequality. We use administrative employer–employee-linked data from 1990 to 2019 for 12 countries and data from bank reports, from 2009 to 2017 in 13 European countries. We find a strong asymmetry in the effect of upswings and downswings in finance on earnings inequality, a weak, if any, mitigating effect of capital requirements on finance’s contribution to inequality, and a restructuring but no absolute effect of the bonus cap on financiers’ earnings. We suggest that while rising financiers’ wages increase inequality in upswings, they are resilient in downswings and thus downswings do not contribute to a symmetric decline in inequality.

URI:

https://hdl.handle.net/10171/69288

DOI:

10.1093/ser/mwac036

Appears in Collections:

DA - IESE - Artículos de revista

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