Question A:
The UK’s removal of the cap on bankers' bonuses (introduced by the EU in 2014 and which limits payouts to two times annual base salary) will provide a measurable boost to the country’s economic growth.
Responses
Responses weighted by each expert's confidence
Question B:
Removing the cap on bankers' bonuses will measurably enhance the global competitiveness of the UK’s financial services sector.
Responses
Responses weighted by each expert's confidence
Question C:
Removing the cap on bankers' bonuses will pose a measurable risk to financial stability in the UK.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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I doubt if it on its own will have a measurable effect. However, I think it could send a signal about the Government's support for the financial services industry in the UK.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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I'd imagine any effect is likely to be very low. If UK banking has been shrinking it's due to Brexit.
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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i am skeptical it will substantially improve bankers' quality
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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 Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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 Maristella Botticini |
Bocconi | Bio/Vote History | ||
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 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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High bonuses in the financial industry are distorsionary over the long term (in terms of resource allocation)+ current drags on GDP are not due to insufficient pay in this sector.
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 Elena Carletti |
Bocconi | Did Not Answer | Bio/Vote History | |
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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 Paul De Grauwe |
LSE | Bio/Vote History | ||
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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 Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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 Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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 Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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 Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The impact of the bonus system on the quality of management is probably not large enough, to have any measurable impact on growth or GDP.
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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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 Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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 Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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You chose a high hurdle. Few government policies are powerful enough to provide a measurable boost to economic growth.
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 Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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 Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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It's too small a matter to make any difference
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 Richard Portes |
London Business School | Bio/Vote History | ||
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There will be no measurable effect on the net flow of bankers to the City, nor will there be any positive incentive effect on investment. If there is a rise in risk-taking, it is unlikely to be the right kind of risk.
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Carol Propper |
Imperial College London | Bio/Vote History | ||
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 Imran Rasul |
University College London | Bio/Vote History | ||
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 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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 Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Link to growth is tenuous, and hard to see how it could be very significant (and therefore measurably statistically significantly different from zero). May still be a good policy, however.
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Bio/Vote History | ||
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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 Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Removing the cap might make London more attractive than Frankfurt and Paris to finance people. But the effect is unlikely to yield a large positive effect on GDP
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 Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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 John Van Reenen |
LSE | Bio/Vote History | ||
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Evidence shows that incentives at these level have little effect on growth, and can even create perverse effects
-see background information here |
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 Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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It will make bankers richer and more reckless. Not clear at all why this would stimulate the economy.
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 John Vickers |
Oxford | Bio/Vote History | ||
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I expect little macro effect but with some tail risk of negative effects from excessive risk-taking.
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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I'm not sure the bonus restrictions had that much affect on compensation in the UK financial sector.
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Better pay does not mean better management and, anyway, the effect if any is not of macroeconomic size
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Again, on its own it is not a significant factor but it is a signal.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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i suspect the effect is marginal.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Maristella Botticini |
Bocconi | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Elena Carletti |
Bocconi | Did Not Answer | Bio/Vote History | |
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Might help attract a few firms with particular business models, but could also weaken effectiveness of the risk control functions of others
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The UK financial services sector is already very competitive. This will not change much as a consequence of lifting the bonus cup. Also, competing institutions in other jurisdictions can adjust the fixed salary to remain competitive.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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More flexibility in pay structures should at the margin help competitiveness, but not clear how restrictive the cap was in the first place.
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Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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Bankers have found other ways of compensating their top employees, e.g., raising basic salary
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Richard Portes |
London Business School | Bio/Vote History | ||
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Banks have adjusted pay policies to the cap.
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Bio/Vote History | ||
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Imran Rasul |
University College London | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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In an industry where asymmetric information and incentives are important, contracts will adjust to this change. It might work, but could backfire.
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Being able to pay more for the top skill in finance will give London an edge over Frankfurt and Paris
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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It might. It might not. Most bankers would increase base salary anyway if there is a cap
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John Vickers |
Oxford | Bio/Vote History | ||
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The cap has not applied to the overall level of remuneration, just the mix of salary and bonus.
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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I think this would have at most a minor impact on the UK's status as a financial sector. Also, moving out of line with the EU's approach on this issue could add to the risk that UK-based financial service providers have reduced access to the EU market.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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It could work the other way round by skewing incentives
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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I doubt if it will affect financial stability very much. It is very small compared to the problems in the UK pension sector over the past week, for example.
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Pol Antras |
Harvard | Bio/Vote History | ||
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No, it would just create more pay inequality.
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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again, marginal effect and better bankers do not necessarily mean less risk.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Maristella Botticini |
Bocconi | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Elena Carletti |
Bocconi | Did Not Answer | Bio/Vote History | |
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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How many individuals will this affect? to what extent will this exacerbate risk taking?
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Directionally yes, but magnitude unlikely to be large
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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Whether measurable or not, the lifting of the bonus cap while competing jurisdictions in the EU do not, may spur the concentration of risk taking activities in London.
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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The link between variable banker pay and financial stability is theoretically and empirically unclear. For relevant evidence see below.
-see background information here |
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Thierry Mayer |
Sciences-Po | Bio/Vote History | ||
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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low basic salary and high bonuses imply that you get the money if you have high returns, which encourage risky investments
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Richard Portes |
London Business School | Bio/Vote History | ||
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MIght be an incentive for more risk-taking, but measurable effect unlikely.
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Bio/Vote History | ||
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Imran Rasul |
University College London | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Effect is positive, as encourages more risk taking, but contracts all adjust, and unclear that this translates into more likely systemic crises.
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Financial stability hinges on macroprudential policy and capitalization of financial sector - not on wages for employees
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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Will pose a small risk
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Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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Maybe, given that UK banks have less equity capital than they should, but measurable? Anyway the better solution is more equity capital, not regulation of pay structures.
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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There is an argument that procyclical profit-linked compensation can undermine financial stability but I just don't think this specific policy is that big a deal.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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