Current research
Finance, Politics and Society
Does Finance Change the Taste for Redistribution?, with M. Korinek and L. Weill, European Journal of Political Economy, revise-resubmit
Abstract: This paper investigates whether financial development shapes people's preferences for redistribution. Although a large literature examines the effects of finance on growth and inequality, much less is known about its influence on the political demand for redistribution. Using individual-level data from the World Values Survey and the European Values Study, we estimate the relation between financial development and preferences for income equality. We find no significant average effect of financial development on redistributive demand. However, this aggregate neutrality masks significant individual-level heterogeneity. We find that financial development is associated with lower support for redistribution among men, married individuals, and right-leaning respondents. In contrast, the effect is significantly positive for more educated individuals. These results suggest that financial development reshapes the political landscape not by shifting average preferences, but by altering the composition and polarization of pro-redistribution coalitions.
Wealth Concentration, Executive Constraints and Democratic Erosion
Abstract: This paper asks whether rising wealth concentration contributes to democratic erosion. Using a panel of more than 100 countries from 1995 to 2024 and local projections, we show that within-country increases in wealth inequality are followed by a persistent decline in liberal democracy. The effect builds gradually and is most pronounced after about five years, consistent with delayed institutional erosion rather than abrupt regime collapse. The pattern is robust to country and year fixed effects, a broad set of controls, alternative measures of wealth inequality and democracy, and an instrumental-variables strategy based on inequality in neighboring countries. The adverse effects are stronger in less consolidated democracies, suggesting that weaker institutional foundations are especially vulnerable to wealth concentration. We then examine potential mechanisms. The evidence points most strongly to institutional capture: across all three wealth-inequality measures, higher concentration is associated with weaker executive constraints. By contrast, evidence for distorted democratic contestation is limited, and evidence for repression is weaker and less robust. Finally, comparable specifications using income inequality yield smaller and less persistent effects, consistent with the view that wealth is more tightly linked to durable political power than income flows.
Government Ownership of Banks and Income Inequality, with V. Broz and L. Weill
Abstract: Government-owned banks remain common worldwide and are often defended as instruments for promoting inclusive growth. This paper examines whether government ownership of banks affects income inequality using a panel of 180 countries over the period 1995–2020. To address endogeneity concerns, we use a novel instrument capturing recipient-country exposure to Chinese development finance and estimate dynamic effects within a local-projections framework. We find that government ownership of banks increases income inequality. The baseline effect is economically meaningful: a 10-percentage-point increase in government bank ownership raises the market Gini by about 1.7 points at the peak response. The effect is most consistently observed in developing countries and non-democratic regimes, and it reaches its maximum slightly less than a decade after the initial increase in government bank ownership. These findings challenge the view that public ownership of banks is inherently inclusive and suggest that, in the absence of strong institutional constraints, state-owned banks may reinforce rather than reduce existing disparities.
Wealth Inequality and Green Innovation: The Role of Financial Frictions, Institutions and Directed Technological Change, with B. Fisera
Abstract: Can the distribution of wealth slow the green transition by changing what economies invent? We examine this question using two complementary datasets: a cross-country panel of green and non-green patenting and firm-level data on automotive innovators. Higher wealth inequality is followed by a persistent decline in green patenting, while non-green patenting is largely unaffected. In our baseline estimates, a one-percentage-point increase in the wealth Gini is associated with a cumulative decline in green patenting of about 2.5 percent over five years. The effect is strongest where financial and institutional frictions are more severe, and among innovators more exposed to external-finance constraints. We also find that green innovation responds less to climate-policy shocks in high-inequality economies. Shift-share instrumental-variable exercises, augmented inverse probability weighting, state-dependent specifications, and additional robustness checks provide consistent evidence: wealth concentration weakens the conditions under which climate policy and private incentives translate into clean technological change.
Climate, Finance, and Macroeconomy
Temperature and the U.S. Economy: From Demand to Supply-Side Effects?, with M. Garcia Rodriquez and C. Pinilla-Torremocha
Abstract: We examine how the macroeconomic effects of temperature shocks in the United States have evolved since 1947. Using a time-varying parameter VAR with stochastic volatility estimated on monthly data, we document a pronounced structural shift in their propagation. Prior to the 1980s, higher temperatures exhibit demand-like dynamics, with output and prices rising together. In recent decades, however, responses have become increasingly supply-like: real activity declines persistently, while prices rise on impact and turn negative at longer horizons. A sectoral decomposition shows that this shift is broad-based, with the services sector playing a central role in recent output dynamics. A detailed analysis of price components reveals that food, energy, and services prices drive most of the aggregate price response, while core inflation remains largely muted. Temperature shocks also explain a growing share of medium-run output and price fluctuations. The shift coincides with rising and more persistent temperatures and remains robust to controlling for monetary policy and regulation, suggesting that a warming climate—rather than changes in the policy or regulatory environment alone—has made temperature shocks increasingly contractionary.
Earthquake Warning Systems and Insurance Premiums in Chinese Provinces, with F. Yahya and M. Hussain
Abstract: This paper studies the effects of Earthquake Early Warning Systems (EWS) on insurance premiums across Chinese provinces from 2007 to 2023. Panel econometric results show that EWS adoption reduces premiums on average but generates strong heterogeneity across the distribution. Premiums fall at lower quantiles, consistent with information-efficiency gains in less developed markets, while they increase at upper quantiles, reflecting greater risk revelation and capacity constraints in mature markets. The effects are strongest in high-risk and financially developed provinces. Spatial estimates indicate that EWS lower premiums locally but raise premiums in neighboring regions. Overall, the insurance impact of EWS depends on market maturity and spatial spillovers rather than infrastructure adoption alone.
Macro-Finance
Measuring Financial Uncertainty: New Evidence from 140 Years of US Newspapers, with S. Kapounek
Abstract: We construct a new monthly news-based index of U.S. financial market uncertainty by analyzing more than 100 million articles from 11 major newspapers from 1885 to 2025. We also build disaggregated subindexes for banks and the stock, bond, and money markets, which display distinct dynamics and highlight the value of sector-level measurement. The index spikes around major financial and policy episodes and differs meaningfully from option-implied volatility and broad policy-uncertainty measures. Using VARs and smooth-transition VARs on monthly data since 1985, we show that financial uncertainty shocks lower industrial production and employment, depress equity prices, and are followed by monetary easing. The shocks widen credit spreads, raise bank margins, and contract bank lending, with financial responses peaking faster than real activity. The macroeconomic effects are markedly stronger in recessions, consistent with a financial-uncertainty multiplier. The index provides a long-run barometer useful for research on monetary policy, financial stability, and international spillovers.
Not so active current research:
Government Spending and Term Structure of Interest Rates in a DSGE Model, with L. Kaszab, A. Marsal and K. Rabitsch
Abstract: Fiscal policy uncertainty shapes the yield curve by amplifying bonds’ hedging role and altering risk premia, with monetary policy determining how inflation risk transmits across maturities.
Central Bank Communication, Uncertainty, and Bank Liquidity Creation: US Evidence, with B. Fisera, I. Hasan, S. Kapounek and L. Weill
Abstract: Uncertainty undermines bank liquidity creation, but central bank communication can reduce it.