Inherited Corporate Control, Inequality and the COVID Crisis

Measuring inequality by comparing growth of billionaires’ wealth with that of equity markets, I find that inequality grows more rapidly by 23.6 ppt during the COVID crisis and even more in low-income countries where heir billionaires’ wealth surges faster than founder billionaires’ wealth by 18.0 ppt. However, such increase in inequality from heir billionaires can be reduced by strong financial institutions. Overall, this paper provides causal evidence that crises increase inequality and that they give rise particularly to inequality arising from heir billionaires in countries with weak financial institutions. If the rise of heir billionaires implies the increasing value of political connections, this evidence raises the plausibility that crises put low-income countries deeper in the middle-income trap.