The effect of financialization on labor's share of income

Petra Dünhaupt

No 17/2013, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: Numerous studies have analyzed the decline in labor's share of income, but only few have linked it to the increase in financialization. The process of financialization can roughly be described as an increasing importance of the financial sector which had an impact on the distribution between wages and profits on the one hand, and retained earnings and financial income in the form of dividends and interests on the other hand. This paper seeks to explore the relationship between financialization and labor's share of income using a time-series cross-section data set of 13 countries over the time period from 1986 until 2007. The results suggest that there is indeed a relationship between increasing dividend and interest payments of non-financial corporations and the decline of the share of wages in national income. Other factors that can be accounted for the decline relate to globalization and a decrease in the bargaining power of labor.

Keywords: Financialization; functional income distribution; labor's share (search for similar items in EconPapers)
JEL-codes: E25 E44 F4 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac and nep-pke
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Citations: View citations in EconPapers (8)

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