Ups and downs in finance, ups without downs in inequality

Olivier Godechot, Nils Neumann, Paula Apascaritei, István Boza, Martin Hallsten, Lasse Henriksen, Are Hermansen, Feng Hou, Jiwook Jung, Naomi Kodama, Alena Křížková, Zoltán Lippényi, Marta M Elvira, Silvia Maja Melzer, Eunmi Mun, Halil Sabanci, Matthew Soener, Max Thaning

Research output: Contribution to journalArticlepeer-review


The upswing in finance in recent decades has led to rising inequality, but do downswings in finance lead to a symmetric decline in inequality? We analyze the asymmetry of the effect of ups and downs in finance, and the effect of increased capital requirements and the bonus cap on national earnings inequality. We use administrative employer–employee-linked data from 1990 to 2019 for 12 countries and data from bank reports, from 2009 to 2017 in 13 European countries. We find a strong asymmetry in the effect of upswings and downswings in finance on earnings inequality, a weak, if any, mitigating effect of capital requirements on finance’s contribution to inequality, and a restructuring but no absolute effect of the bonus cap on financiers’ earnings. We suggest that while rising financiers’ wages increase inequality in upswings, they are resilient in downswings and thus downswings do not contribute to a symmetric decline in inequality.
Original languageEnglish (US)
Article numbermwac036
Pages (from-to)1601-1627
Number of pages27
JournalSocio-Economic Review
Issue number3
Early online dateJul 15 2022
StatePublished - Jul 1 2023


  • D31 personal income
  • G38 government policy and regulation
  • N2 financial markets and institutions
  • finance
  • financial crisis
  • inequality
  • regulation
  • wealth and their distributions

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Sociology and Political Science


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