Financialization more than globalization! The contribution of global cities to inequalities

Olivier Godechot (1, 2, 3) , Nils Neumann (4) , Lasse Henriksen (5) , Skeie Hermansen (6) , Feng Hou (7) , Naomi Kodama (8) , Zoltán Lippényi (9) , Silvia Maja Melzer (10) , Halil Sabanci (11) , Max Thaning (12) , Paula Apascaritei (13) , Dustin Avent Holt (14) , Nina Bandelj (15) , István Boza (16) , Marta M Elvira (17) , Gergely Hajdu (18) , Alena Křižkova (19) , Andrew Penner (15) , Andreja Poje (20) , William Rainey (21) , Mirna Safi (1, 22) , Matthew Soener (23) , Donald Tomaskovic-Devey (21)

1 Institut d'Études Politiques [IEP] - Paris
2 CRIS - Centre de recherche sur les inégalités sociales (Sciences Po, CNRS)
3 AxPo - AxPo Observatory of Market Society Polarization
4 University of Michigan
5 Copenhaguen Business School
6 UiO - University of Oslo
7 Statistics Canada
8 Meiji Gakuin University
9 University of Groningen [Groningen]
10 UB - Universitat de Barcelona
11 Frankfurt School of Finance and Management
12 Stockholm University
13 UC3M - Universidad Carlos III de Madrid [Madrid]
14 Augusta University
15 UC Irvine - University of California [Irvine]
16 Research Centre for Economic and Regional Studies
17 IESE Business School
18 Vienna University of Economics and Business
19 CAS - Czech Academy of Sciences [Prague]
20 Association of Free Trade Unions of Slovenia
21 UMass Amherst - University of Massachusetts [Amherst]
22 CRIS - Centre de Recherche Internationale pour la Sante
23 UIUC - University of Illinois at Urbana-Champaign [Urbana]

Global cities contribute to earnings inequality by concentrating high-paying jobs. But how much and why? In this paper, we quantify the contribution of global cities to earnings inequality and examine whether this contribution is attributable to the financialization of cities or their coordinating role in the global trade of goods and non-financial services. Using administrative linked employer-employee earnings data in nine advanced capitalist democracies and published Internal Revenue Service tables for the United States between 1989 and 2019, we show that global cities account for a substantial portion of national and regional increases in inequality. This contribution to inequality is far greater in financial cities than in the most comparable non-financial cities. In addition, the divergence in pay levels between financial and comparison cities increases with the financialization of respective countries. Our evidence thus shows that the contribution of global cities to inequality is driven more by the concentration of financiers than by other functions of global economic coordination.

Domains: Economics and Finance

Olivier Godechot, Nils Neumann, Lasse Henriksen, Skeie Hermansen, Feng Hou, et al.. Financialization more than globalization! The contribution of global cities to inequalities. 2023. ⟨halshs-04173209⟩