Who gets the flow? Financial globalisation and
wealth inequality
Simone Arrigoni; Journal of Macroeconomics, September
2024
Abstract:
This paper studies whether the advent of financial
globalisation has contributed to increasing wealth inequality in the United
States, France, and the United Kingdom. I find that (i) positive changes in the
benchmark measure of financial globalisation are associated with a positive
change in the top 1% and 10% wealth shares and a negative change in the wealth
share of the bottom 50% of the distribution. This is equivalent to an average
gain of $1 trillion for the top 10% and $1.6 trillion for the top 1%, over the
period of interest. (ii) Portfolio equities and financial derivatives appear to
be the driving components behind the increase in wealth shares. (iii) The
implied change in wealth shares is driven by the accumulation of new financial
wealth (flow) rather than the valuation of existing one. (iv) The dynamic is
strengthened when a banking crisis hits the economy, possibly because people at
the top of the distribution can recover their lost wealth faster than people at
the bottom. The main finding is robust to an expanded country sample, albeit
reducing the historical context beyond the scope of this paper.