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

34 Pages Posted: 5 Mar 2018

See all articles by Julia Tanndal

Julia Tanndal

Brown University

Daniel Waldenström

Uppsala University - Department of Economics; Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: April 2018

Abstract

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.

Suggested Citation

Tanndal, Julia and Waldenström, Daniel, Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang (April 2018). Economica, Vol. 85, Issue 338, pp. 232-265, 2018. Available at SSRN: https://ssrn.com/abstract=3133421 or http://dx.doi.org/10.1111/ecca.12247

Julia Tanndal (Contact Author)

Brown University

Box 1860
Providence, RI 02912
United States

Daniel Waldenström

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden

HOME PAGE: http://www.uueconomics.se/danielw

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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