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Bankers and their bonuses

Author

Listed:
  • Bell, Brian
  • Van Reenen, John

Abstract

We analyse the role of financial sector workers in the huge rise of the share of earnings going to those at the very top of the pay distribution in the UK. Rising bankers' bonuses accounted for two-thirds of the increase in the share of the top 1% after 1999. Surprisingly, bankers' share of earnings showed no decline between the peak of the financial boom in 2007 and 2011, three years after the global crisis began. Nor did bankers' relative employment position deteriorate over this period. We discuss proposed policy responses such as transparency, bonus 'clawbacks', numerical bonus targets and tax.

Suggested Citation

  • Bell, Brian & Van Reenen, John, 2014. "Bankers and their bonuses," LSE Research Online Documents on Economics 56057, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:56057
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    File URL: http://eprints.lse.ac.uk/56057/
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    References listed on IDEAS

    as
    1. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 49-100.
    2. (IFS), Institute for Fiscal Studies & Mirrlees, James (ed.), 2011. "Tax By Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553747.
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    5. Steven N. Kaplan & Joshua Rauh, 2010. "Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?," NBER Chapters,in: Corporate Governance National Bureau of Economic Research, Inc.
    6. Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," Post-Print halshs-00754875, HAL.
    7. Atkinson, A. B. & Piketty, Thomas (ed.), 2010. "Top Incomes: A Global Perspective," OUP Catalogue, Oxford University Press, number 9780199286898.
    8. Atkinson, A. B. & Piketty, Thomas (ed.), 2007. "Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries," OUP Catalogue, Oxford University Press, number 9780199286881.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Bonuses: here to stay
      by chris in Stumbling and Mumbling on 2016-08-23 16:48:58

    Citations

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    Cited by:

    1. Olivier Godechot, 2019. "Conclusion: What finance manufactures," Sciences Po publications info:hdl:2441/4ff88coju39, Sciences Po.
    2. Giovanni Marin & Francesco Vona, 2017. "Finance and the Misallocation of Scientific, Engineering and Mathematical Talent," Documents de Travail de l'OFCE 2017-27, Observatoire Francais des Conjonctures Economiques (OFCE).
    3. repec:eee:crpeac:v:52:y:2018:i:c:p:35-47 is not listed on IDEAS
    4. Aedín Doris & Donal O’Neill & Olive Sweetman, 2015. "Wage flexibility and the great recession: the response of the Irish labour market," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-24, December.
    5. Bryan, Mark & Bryson, Alex, 2016. "Has performance pay increased wage inequality in Britain?," Labour Economics, Elsevier, vol. 41(C), pages 149-161.
    6. Kvaløy, Ola & Nieken, Petra & Schöttner, Anja, 2015. "Hidden benefits of reward: A field experiment on motivation and monetary incentives," European Economic Review, Elsevier, vol. 76(C), pages 188-199.
    7. Joanne Lindley & Steven Mcintosh, 2017. "Finance Sector Wage Growth and the Role of Human Capital," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 570-591, August.
    8. Roland Bénabou & Jean Tirole, 2016. "Bonus Culture: Competitive Pay, Screening, and Multitasking," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 305-370.
    9. repec:kap:regeco:v:53:y:2018:i:2:d:10.1007_s11149-018-9352-3 is not listed on IDEAS
    10. repec:bla:econom:v:84:y:2017:i:334:p:157-179 is not listed on IDEAS
    11. Chris Belfield & Richard Blundell & Jonathan Cribb & Andrew Hood & Robert Joyce, 2017. "Two Decades of Income Inequality in Britain: The Role of Wages, Household Earnings and Redistribution," Economica, London School of Economics and Political Science, vol. 84(334), pages 157-179, April.
    12. Sudip Ranjan Basu, 2017. "Do data show divergence? Revisiting global income inequality trends," MPDD Working Paper Series WP/17/03, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    13. repec:ddj:fserec:y:2018:p:208-214 is not listed on IDEAS
    14. Ken-Hou Lin, 2016. "The Rise of Finance and Firm Employment Dynamics," Organization Science, INFORMS, vol. 27(4), pages 972-988, August.
    15. Fortin, Nicole M. & Bell, Brian & Böhm, Michael, 2017. "Top earnings inequality and the gender pay gap: Canada, Sweden, and the United Kingdom," Labour Economics, Elsevier, vol. 47(C), pages 107-123.
    16. Alain Cohn & Ernst Fehr & Michel André Maréchal, 2017. "Do professional norms in the banking industry favor risk-taking?," ECON - Working Papers 244, Department of Economics - University of Zurich.
    17. repec:jid:journl:y:2017:v:25:i:1:p:1-25 is not listed on IDEAS
    18. MADSEN, Jakob B, 2018. "Is Inequality Increasing in r-g? The Dynamics of Capital’s Income Share in the UK, 1210-2013," Discussion paper series HIAS-E-70, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    19. Axelson, Ulf & Bond, Philip, 2015. "Wall Street occupations," LSE Research Online Documents on Economics 37448, London School of Economics and Political Science, LSE Library.
    20. Nolan, Brian & Richiardi, Matteo & Valenzuela, Luis, 2018. "The Drivers of Inequality in Rich Countries," MPRA Paper 89806, University Library of Munich, Germany.
    21. Gietl, Daniel & Haufler, Andreas, 2016. "Bonus Taxes and International Competition for Bank Managers," Annual Conference 2016 (Augsburg): Demographic Change 145615, Verein für Socialpolitik / German Economic Association.
    22. Eberhard Feess & Ansgar Wohlschlegel, 2018. "Bank capital requirements and mandatory deferral of compensation," Journal of Regulatory Economics, Springer, vol. 53(2), pages 206-242, April.
    23. Boustanifar, Hamid & Grant, Everett & Reshef, Ariell, 2016. "Wages and human capital in finance: international evidence, 1970-2005," Globalization Institute Working Papers 266, Federal Reserve Bank of Dallas.

    More about this item

    JEL classification:

    • N0 - Economic History - - General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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