Working Paper No. 1106

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

Published: January 28, 2016Pages: 71Keywords: Income inequality; Synthetic control method; InstitutionsJEL-codes: D31; G28; H24; J30; N20
Published version

Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang Julia Tanndal and Daniel Waldenström


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.

Daniel Waldenström

Contact

Ph: +46 8 665 4584
Mob: +46 70 4916082
daniel.waldenstrom@if...

Interdisciplinary European Studies

The European Union in a Changing World Order

Pages-from-2019-Oxelheim-m.gif

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. 

About the book

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se