Ups and downs in finance, ups without downs in inequality

Godechot, Olivier; Neumann, Nils; Apascaritei, Paula; Boza, István; Hallsten, Martin; Henriksen, Lasse; Hermansen, Are; Hou, Feng; Jung, Jiwook; Kodama, Naomi; Křížková, Alena; Lippényi, Zoltán; Elvira, Marta M.; Melzer, Silvia Maja; Mun, Eunm; Sabanci, Halil; Soener, Matthew; Thaning, Max

Ups and downs in finance, ups without downs in inequality

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dc.contributor.author Godechot, Olivier
dc.contributor.author Neumann, Nils
dc.contributor.author Apascaritei, Paula
dc.contributor.author Boza, István
dc.contributor.author Hallsten, Martin
dc.contributor.author Henriksen, Lasse
dc.contributor.author Hermansen, Are
dc.contributor.author Hou, Feng
dc.contributor.author Jung, Jiwook
dc.contributor.author Kodama, Naomi
dc.contributor.author Křížková, Alena
dc.contributor.author Lippényi, Zoltán
dc.contributor.author Elvira, Marta M.
dc.contributor.author Melzer, Silvia Maja
dc.contributor.author Mun, Eunm
dc.contributor.author Sabanci, Halil
dc.contributor.author Soener, Matthew
dc.contributor.author Thaning, Max
dc.date.accessioned 2024-05-17T10:35:29Z
dc.date.available 2024-05-17T10:35:29Z
dc.date.issued 2023
dc.description Includes supplementary materials for the online appendix.
dc.description.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.
dc.description.sponsorship The research and writing of this paper benefited from the monetary support of the following institutions: National Agency for Research (grant ANR-17-CE41-0009-01), Alexander von Humboldt-Foundation (grant AR8227), Independent Research Fund Denmark (grant 5052-00143b), Swedish Research Council for Health, Working Life and Welfare supports (grant 2015-00807), European Social Fund and state budget of the Czech Republic (grant CZ.03.1.51/0.0/0.0/15_009/0003702), Rozvoj Výzkumné Organizace (RVO:68378025), NPO “Systemic Risk Institute” LX22NPO5101, Chair in Family-Owned Business at IESE, Research Council of Norway (grant 287016), the Spanish Ministry of Science and Innovation (grant nr. PID2020-118807RB-I00/AEI/10.13039/501100011033), the Fritz Henkel Foundation (Endowed PhD Scholarship), Swedish Forte (grant nr. 2015-00807), from the European Research Council ERC Advanced Grant (grant nr. 340045), and the US National Science Foundation (grant SES-1528294).
dc.format.mimetype application/pdf
dc.identifier.citation Godechot O, Neumann N, Apascaritei P, Boza I, Hallsten M, Henriksen L, et al. Ups and downs in finance, ups without downs in inequality. Socioecon Rev. 2023 Jul;21(3):1601-27. DOI: 10.1093/ser/mwac036
dc.identifier.doi http://dx.doi.org/10.1093/ser/mwac036
dc.identifier.issn 1475-1461
dc.identifier.uri http://hdl.handle.net/10230/60179
dc.language.iso eng
dc.publisher Oxford University Press
dc.relation.ispartof Socio-economic review. 2023 Jul;21(3):1601-27
dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/340045
dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/PID2020-118807RB-I00
dc.rights © The Author(s) 2022. Published by Oxford University Press and the Society for the Advancement of Socio-Economics. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.
dc.rights.accessRights info:eu-repo/semantics/openAccess
dc.rights.uri http://creativecommons.org/licenses/by/4.0/
dc.subject.keyword Inequality
dc.subject.keyword Finance
dc.subject.keyword Financial crisis
dc.subject.keyword Regulation
dc.title Ups and downs in finance, ups without downs in inequality
dc.type info:eu-repo/semantics/article
dc.type.version info:eu-repo/semantics/publishedVersion

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