Wages and Human Capital in Finance: International Evidence, 1970-2005

Boustanifar, Hamid; Grant, Everett; Reshef, Ariell

doi:10.24149/gwp266

Cited by 4 publications

(7 citation statements)

References 61 publications

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“…Philippon and Reshef , ; Boustanifar et al . ), which is supported in our analysis of occupation‐level income data in the UK around the time of the Big Bang. However, in contrast to previous literature, we find less support for the alternative main channel working through higher wealth returns, which disproportionately increase capital incomes among top earners.…”

Section: Introductionsupporting

confidence: 81%

“…Philippon and Reshef () find similar patterns in other countries and historical eras, and Boustanifar et al . () find, using cross‐country regressions, that financial deregulation is the most important driver of the relative wage and skill intensity of finance industry workers.…”

Section: Why Would Big Bangs Raise Top Income Shares?mentioning

confidence: 99%

“…This dataset has been used by Boustanifar et al . () to investigate wages in the finance sector, and we largely aim to follow their method in treating the data . A panel regression with industry–country fixed effects and the usual set of controls reveals no effect of the Big Bang in the UK, but for Japan, the relative wage for younger workers increases by approximately 5%.…”

Section: Further Evidence Of Big Bang Effectsmentioning

confidence: 99%

See 2 more Smart Citations

Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang

Tanndal

Waldenström

2017

Economica

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I EIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. This study estimates the impact of financial deregulation on top income shares. Using the novel econometric method of constructing synthetic control groups, we show that the "Big Bang"-deregulations in the United Kingdom in 1986 and Japan 1997-1999 increased the share of pre-tax incomes going to top earners by over 20 percent in the U.K. and over 10 percent in Japan. The effect is strongest in the top five percentiles in the U.K. whereas it is mainly driven by the lower part of the top decile in Japan. The findings are robust to placebo tests, alternative ways to construct synthetic controls and scrutiny of post-treatment trends. Higher earnings among financial sector employees appear to be an important mechanism behind this result.JEL Classification: D31, G18, H24, J30, N20

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Section: Introductionsupporting

confidence: 81%

Section: Why Would Big Bangs Raise Top Income Shares?mentioning

confidence: 99%

Section: Further Evidence Of Big Bang Effectsmentioning

confidence: 99%

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Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang

Tanndal

Waldenström

2017

Economica

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“…In addition, the origin of financial rent is beginning to be elucidated. Financial deregulation of the past thirty years, creating new markets, favored its emergence (Philippon andReshef 2012, 2013;Boustanifar, Grant, and Reshef 2014). So, as in Flaherty (2015), I logically find in my data a link between financial deregulation and income inequality (see Table A20).…”

Section: Financialization Is Marketizationmentioning

confidence: 83%

“…It increased almost as fast in other OECD countries (Philippon and Reshef 2013). This development goes hand in hand, paradoxically, with the increasing cost of financial services (Philippon 2014;Bazot 2014) and shows the existence of rents (Tomaskovic-Devey and Lin 2011) fueled by financial deregulation (Krippner 2011;Philippon and Reshef 2012) and captured by its highest-paid employees (Godechot 2012;Bell and Van Reenen 2013;Boustanifar, Grant, and Reshef 2014;Denk 2015).…”

mentioning

confidence: 99%

Financialization Is Marketization! A Study of the Respective Impacts of Various Dimensions of Financialization on the Increase in Global Inequality

Godechot¹

2016

SocScience

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Abstract:In this article, I study the impact of financialization on the rise in inequality in 18 OECD countries from 1970 to 2011 and measure the respective roles of various forms of financialization: the growth of the financial sector; the growth of one of its subcomponents, financial markets; the financialization of non-financial firms; and the financialization of households. I test these impacts using cross-country panel regressions in OECD countries. I show first that the share of the finance sector within the GDP is a substantial driver of world inequality, explaining between 20 and 40 percent of its increase from 1980 to 2007. When I decompose this financial sector effect, I find that this evolution was mainly driven by the increase in the volume of stocks traded in national stock exchanges and by the volume of shares held as assets in banks' balance sheets. By contrast, the financialization of non-financial firms and of households does not play a substantial role. Based on this inequality test, I therefore interpret financialization as being mainly a phenomenon of marketization, redefined as the growing amount of social energy devoted to the trade of financial instruments on financial markets.

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Competition for traders and risk

Bijlsma

Boone

Zwart

2018

The RAND J of Economics

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Perverse incentives for banks' traders have played a role in the financial crisis. We study how labor market competition interacts with the structure of compensation to result in excessive risk taking. In a model with trader moral hazard and adverse selection on trader abilities, we demonstrate how banks optimally induce top traders to take more risk as competition on the labor market intensifies, even if banks internalize the costs of negative outcomes. Distorting risk‐taking incentives allows banks to reduce the surplus offered to low‐ability traders. We find that increasing bank capital requirements does not unambiguously reduce risk taking by top traders.

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Wages and Human Capital in Finance: International Evidence, 1970-2005

Cited by 4 publications

References 61 publications

Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang

Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang

Financialization Is Marketization! A Study of the Respective Impacts of Various Dimensions of Financialization on the Increase in Global Inequality

Competition for traders and risk

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