On May 27, 2025, the jury of the fifth annual Georges Gallais-Hamonno Research Prize in Historical Finance announced that CPE Postdoctoral Research Scholar Dario Laudati had received a Special Commendation award for his paper, Inequality and the Rise of Finance.
Professor Claude Diebolt, head of the jury, defined the paper as: "An ambitious and timely contribution that impressed the jury with both its depth and originality".
In his paper, Dario establishes a root cause foundation for the rise of the financial sector in the United States, as observed from the 1980s. He describes this as the joint occurrence of multiple factors. An initial rise in inequality has spurted higher savings to intermediate by the richer households. Such households solved their portfolio problems by demanding more of both safe and risky assets. Lacking a sufficiently ample supply of public safe assets, Dario claims that it was the new private financial intermediaries (shadow banks) that stepped in to take advantage of such gap by creating synthetic safe assets. As such, the change in composition and size of the financial sector can be seen as two sides of the same token. Also, pressure on financial assets led to higher capital gains that exacerbated inequality itself in a self-reinforcing feedback loop.
Dario's paper generates a unified framework to explain the joint occurrence of higher inequality, compressed real interest rates, higher households indebtedness, and larger financial sector.
The link to Inequality and the Rise of Finance can be found here.
