Ups and downs in finance, ups without downs in inequality

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

No 21/2, MaxPo Discussion Paper Series from Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)

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.

Keywords: inequality; finance; financial crisis; regulation (search for similar items in EconPapers)
JEL-codes: D31 G38 N2 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-his and nep-lma
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https://www.econstor.eu/bitstream/10419/247780/1/1780067542.pdf (application/pdf)

Related works:
Working Paper: Ups and downs in finance, ups without downs in inequality (2023)
Working Paper: Ups and downs in finance, ups without downs in inequality (2023)
Working Paper: Ups and Downs in Finance, Ups without Downs in Inequality (2021)
Working Paper: Ups and Downs in Finance, Ups without Downs in Inequality (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:maxpod:212

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