2018

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

Reprint No. 2018:16

Author(s): Julia Tanndal and Daniel WaldenströmYear: 2018 Title: Economica Volume (No.): 85 (338) Pages: 232–265
Online article (restrictions may apply)
Preliminary version


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.


Reference:
Tanndal, Julia and Daniel Waldenström (2018), "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang". Economica 85(338), 232–265.

Daniel Waldenström

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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