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Finance and the rise in inequalities in France

  • Olivier Godechot

    ()

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CMH - Centre Maurice Halbwachs - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - Université de Caen Basse-Normandie - CNRS, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

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    Based on the DADS, a very detailed French database on wages, we show that wage inequalities started to increase in France in the mid-1990s. This phenomenon is limited to the top end of income distribution and concerns mainly the top 0.1%, whose share of total salaries increased from 1.2% to 2% between 1996 and 2007. This increase in inequality was accompanied by some changes in the social composition of this wage elite. These include a decline in employees in the provinces, in CEOs; and an increase in lower rank management like chief officers and other administrative managers, in sportspersons, and in Paris Region employees. A sector approach shows that finance (3% of private sector employees) is responsible for half of the rise in inequalities at the top end of wage distribution. We discuss the role of the size of financial activity in the tremendous increase in top financial wages.

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    Paper provided by HAL in its series Working Papers with number halshs-00584881.

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    Date of creation: Apr 2011
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    Handle: RePEc:hal:wpaper:halshs-00584881
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    1. Xavier Gabaix & Augustin Landier, 2008. "Why Has CEO Pay Increased So Much?," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 49-100, 02.
    2. Lucian Bebchuk & Yaniv Grinstein, 2005. "The Growth of Executive Pay," NBER Working Papers 11443, National Bureau of Economic Research, Inc.
    3. James Crotty, 2009. "The Bonus-Driven “Rainmaker” Financial Firm: How These Firms Enrich Top Employees, Destroy Shareholder Value and Create Systemic Financial Instability," UMASS Amherst Economics Working Papers 2009-13, University of Massachusetts Amherst, Department of Economics.
    4. Wojciech Kopczuk & Emmanuel Saez & Jae Song, 2010. "Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 91-128, February.
    5. Amable, Bruno, 2003. "The Diversity of Modern Capitalism," OUP Catalogue, Oxford University Press, number 9780199261147.
    6. Brian Bell & John Van Reenen, 2010. "Bankers' pay and extreme wage inequality in the UK," LSE Research Online Documents on Economics 28780, London School of Economics and Political Science, LSE Library.
    7. Thomas Philippon & Ariell Reshef, 2009. "Wages and Human Capital in the U.S. Financial Industry: 1909-2006," NBER Working Papers 14644, National Bureau of Economic Research, Inc.
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