Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301237 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 10-2024
Publisher: 
Philipps-University Marburg, School of Business and Economics, Marburg
Abstract: 
In this paper, I study the impact of financial integration on between-firm wage inequality using an unbalanced panel for 20 European countries over the period 1999-2021. With the impulse response functions estimated using local projections, I find that financial integration, as measured by the sum of external assets and liabilities, is associated with increased wage inequality within industries. These effects are more pronounced in the mid-term rather than in the short-term. The direction of financial integration, i.e., whether it involves an increase in external assets or liabilities, also matters: inward finan- cial integration significantly increases wage inequality, while outward financial integration does not. I also provide empirical evidence on the channel of distributional effects of financial integration. The financial integration shocks widen the capital intensity (the capital-to-labor ratio) gap within industries, which in turn widens the labor productivity gap. Through this channel, financial integration may affect between-firm wage inequality. Furthermore, the impact of financial integration on wage inequality depends on the external financial dependence of individual industries, while the moderating effect of financial development in each country is less definitive.
Subjects: 
Financial integration
wage inequality
local projections
JEL: 
D63
F36
F38
J31
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.