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Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang
Author(s) -
Tanndal Julia,
Waldenström Daniel
Publication year - 2018
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12247
Subject(s) - microdata (statistics) , deregulation , income shares , economics , earnings , labour economics , big bang (financial markets) , wage , finance , monetary economics , market economy , income distribution , inequality , mathematical analysis , population , demography , mathematics , sociology , census
We estimate the impact of financial market deregulation on top income shares. Using the novel synthetic control method to investigate the two ‘Big Bangs’ of financial deregulation, the UK in 1986 and Japan in 1997–9, we find that pre‐tax top income shares increased after both deregulation episodes. This finding is robust to placebo tests, alternative ways of constructing synthetic controls, and the examination of post‐treatment trends and UK wage microdata trends. Higher earnings among financial sector employees appears to be the key mechanism behind this result.