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The revolving door, state connections, and inequality of influence in the financial sector

Author

Listed:
  • Elise Brezis

    (Bar-Ilan University [Israël])

  • Joël Cariolle

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

Abstract

This paper shows that the revolving door generates inequality of influence between financial firms and creates economic distortions. We first develop a theoretical model, introducing the notion of "bureaucratic capital" and stressing how the revolving door generates inequality in bureaucratic capital leading to inequality in profits. Then this prediction is tested, using a new database that tracks the revolving door process involving the 20 biggest US "diversified banks." We show that regulators who supply a large stock of bureaucratic capital are more likely to be hired by the top five banks. We also develop indices of the inequality of influence between banks. We show that banks in the top revenue quintile concentrate around 80% of revolving door movements. Goldman Sachs appears as the prime beneficiary of this process, capturing approximately 30% of the total stock of bureaucratic capital.

Suggested Citation

  • Elise Brezis & Joël Cariolle, 2019. "The revolving door, state connections, and inequality of influence in the financial sector," Post-Print hal-04217771, HAL.
    • Handle: RePEc:hal:journl:hal-04217771
    DOI: 10.1017/S1744137418000498
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    Cited by:

    1. Elise S. Brezis, 2022. "Jewish Law and Ethics: The Case of the Revolving Door," Working Papers 2022-03, Bar-Ilan University, Department of Economics.
    2. Elise S. Brezis, 2023. "Regulating the Revolving Door of Regulators: Legal vs. Ethical Issues," Economies, MDPI, vol. 12(1), pages 1-13, December.
    3. Vahabi, Mehrdad & Mohajer, Nasser, 2019. "درنگی سنجشگرایانه درباره‌ی نئولیبرالیسم [A Critical Appraisal of Neoliberalism]," MPRA Paper 97892, University Library of Munich, Germany.
    4. Adam William Chalmers & Robyn Klingler‐Vidra & Alfio Puglisi & Lisa Remke, 2022. "In and out of revolving doors in European Union financial regulatory authorities," Regulation & Governance, John Wiley & Sons, vol. 16(4), pages 1233-1249, October.
    5. Mehrdad Vahabi, 2024. "Islamic revolution and Anfal," Public Choice, Springer, vol. 200(3), pages 383-401, September.
    6. Keren Borenstein-Nativ, 2021. "Financial governance in a neoliberal era: controlling the banks by controlling their managerial recruitment sources," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(3), pages 232-249, September.
    7. Samira Guennif, 2022. "Capture and passive predation in times of COVID-19 pandemic," Public Choice, Springer, vol. 193(3), pages 163-186, December.

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