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Ups and Downs in Finance, Ups without Downs in Inequality

Olivier Godechot, Nils Neumann (), Paula Apascaritei, István Boza, Martin Hällsten, Lasse Henriksen, Are Hermansen, Feng Hou, Jiwook Jung, Eunmi Melzer, Halil Mun, Matthew Sabanci, Max Soener, Naomi Kodama, Alena Křížková, Zoltán Lippényi, Elvira Marta, Silvia Melzer, Eunmi Mun, Halil Sabanci, Matthew Soener () and Max Thaning
Additional contact information
Nils Neumann: MaxPo - Max Planck Sciences Po Center on Coping with Instability in Market Societies - Max Planck Institute for the Study of Societies - Max-Planck-Gesellschaft - Sciences Po - Sciences Po
Martin Hällsten: Stockholm University
Lasse Henriksen: CBS - Copenhagen Business School [Copenhagen]

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Abstract: The upswing in finance over the past several decades has led to rising inequality, but do downswings in finance lead to a symmetric decline in inequality? In this paper, we analyze the asymmetry of the effect of ups and downs in financial markets, as well as the effect of increased capital requirements and the bonus cap on national earnings inequality. We use administrative employer-employee linked data on earnings from 1990 to 2017 for twelve countries. Additionally, we use data on earnings from bank reports, from 2009 to 2017 in thirteen European countries. We find a strong asymmetry in the effects of financial ups and downs on earnings inequality, a mitigating effect of rising capital requirements on the contribution of finance to inequality, and a restructuring effect of the bonus cap for the earnings of financiers, while neither policy affects absolute levels of earnings inequality.

Date: 2021-12-01
New Economics Papers: this item is included in nep-fdg and nep-isf
Note: View the original document on HAL open archive server: https://hal.science/hal-03462501
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Related works:
Working Paper: Ups and downs in finance, ups without downs in inequality (2023) Downloads
Working Paper: Ups and downs in finance, ups without downs in inequality (2023) Downloads
Working Paper: Ups and Downs in Finance, Ups without Downs in Inequality (2021) Downloads
Working Paper: Ups and downs in finance, ups without downs in inequality (2021) Downloads
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