Finance sector wages: explaining their high level and growth

Joanne Lindley, Steven McIntosh 21 September 2014

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Individuals who work in the finance sector enjoy a significant wage advantage. This wage premium has received increasing attention from researchers following the financial crisis, with focus being put onto wages at the top of the distribution in general, and finance sector wages in particular (see Bell and Van Reenen 2010, 2013 for discussion in the UK context). Policymakers have also targeted this wage premium, with the recent implementation of the Capital Requirements Directive capping bankers’ bonuses at a maximum of one year of salary from 2014.

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Topics:  Financial markets Microeconomic regulation

Tags:  Bankers’ bonuses, banking, wages, Inequality, UK, regulation, asymmetric information, Executive compensation, Finance, task-biased technological change, ICT

Do all firms have equal access to external financing?

Neil Kay, Gavin Murphy, Conor O'Toole, Iulia Siedschlag, Brian O'Connell 29 June 2014

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The proportion of bank loan acceptances has fallen significantly following the crisis, along with the level of enterprise investment. The sharpest falls in both have been in countries hardest hit by the crisis. While in a number of countries – such as Finland, Malta, and Sweden – the declines have been modest, in others – such as in Bulgaria, Ireland, Denmark, Lithuania, Spain, and Greece – they have approached or exceeded 30%.

Figure 1. Percentage change in bank loan acceptances

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Topics:  EU policies Financial markets

Tags:  investment, lending, credit, Finance, SMEs, credit rationing, borrowing, information asymmetries

Gaps, cracks and lacunae: The finance and growth nexus in low-income countries

Nauro F Campos, Stefan Dercon 01 March 2014

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Are quantitative and qualitative improvements in financial markets, institutions, instruments, and intermediaries positively and closely associated to the processes of economic growth and development? Does finance cause growth? Once upon a time, economists were deeply divided on these issues. Until about 1990, when endogenous growth gained prominence, there were few economists (notably Joseph Schumpeter) that believed financial development drove growth. The Schumpeterian view is that growth is driven by innovation and innovation is driven by credit. Without finance there is no growth.

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Topics:  Development

Tags:  growth, Low-income countries, Finance

Informal or formal financing: First evidence on co-funding of Chinese firms

Hans Degryse, Liping Lu, Steven Ongena 21 August 2013

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The credit squeeze in June 2013 has triggered policymakers’ concern worldwide about a potential debt crisis in China, while at the same time the Chinese government has moved to crack down on undisciplined lending in order to alleviate the debt-bubble fears emanating from the shadow banking system.1 

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Topics:  Development Financial markets

Tags:  China, investment, Finance

Banking crises and political survival over the long run – why Great Expectations matter

Jeffrey Chwieroth, Andrew Walter 10 May 2013

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The wave of banking and sovereign-debt crises that began in 2007 has had powerful and continuing economic consequences (IMF 2013a; 2013b). Economists have used long run historical data to investigate the economic aftermaths of financial crises, but we lack any equivalent panoramic analysis of the impact of crises on politics. This is an important gap because these political effects, especially the survival prospects of incumbent governments, can shape governments’ post-Crisis policy choices, market sentiment, and thus economic outcomes.

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Topics:  Global crisis Politics and economics

Tags:  elections, business cycle, Eurozone crisis, Finance

Hair of the dog that bit us: New and improved capital requirements threaten to perpetuate megabank access to a taxpayer put

Edward J Kane 30 January 2013

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This column is a lead commentary in the VoxEU Debate "Banking reform: Do we know what has to be done?"

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Topics:  International finance

Tags:  financial regulation, global crisis, Too big to fail, banks, Finance, taxpayers

Why scarce small and medium enterprise financing hinders growth in Latin America: A role for public policies

Rolando Avendaño, Niels Boehm, Elisa Calza 27 January 2013

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Small and medium enterprises represent a significant share of emerging economies’ business fabric. Nevertheless, they continue to face multiple challenges in meeting their financing needs. Public financial institutions have come to play an active role in addressing these financing gaps through new operational mechanisms and adapted instruments.

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Topics:  Development

Tags:  Latin America, Finance, SMEs

Information asymmetry raises the cost of capital for corporations

James Choi, Hongjun Yan 25 January 2013

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Governments around the world try to level the information playing field among investors by regulating the disclosure of corporate information. But what is the cost of unequal access to information? In this column, we review evidence from the three most recent papers in this area.

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Topics:  Frontiers of economic research International finance

Tags:  Finance, information asymmetry

Why financial markets are inefficient

Roger E. A. Farmer 22 January 2013

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Writing in a review of Justin Fox’s book The Myth of the Efficient Market, Richard Thaler (2009) has drawn attention to two dimensions of the efficient markets hypothesis, what he refers to as:

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Topics:  Financial markets Macroeconomic policy

Tags:  efficient market hypothesis, Finance, first welfare theorem, market fluctuations

Implementation of Basel III in the US will bring back the regulatory arbitrage problems under Basel I

Takeo Hoshi 23 December 2012

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This column is a lead commentary in the VoxEU Debate "Banking reform: Do we know what has to be done?"

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Topics:  International finance

Tags:  regulation, banks, Basel, Dodd-Frank, Finance

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