Investment Crowding-Out and Labor Market Effects of Financialization in the US

Ignacio González and Hector Sala

Scottish Journal of Political Economy, 2014, vol. 61, issue 5, 589-613

Abstract: type="main" xml:id="sjpe12059-abs-0001">

This paper studies the impact of financialization on unemployment in the United States. We estimate a dynamic multi-equation macro labor model including labor demand, labor suppy, wage-setting, and capital accumulation equations. Financialization appears as a key determinant of capital accumulation which, in turn, is the transmission channel toward its unemployment effects. We conduct a series of counterfactual simulations where we quantify the macroeconomic consequences of the recent swings experienced by the financialization process. We find that it has had relevant unemployment effects in all periods considered, even in those where financial payments were not the main driver of capital accumulation. We also identify a structural change in the financialization process in the early 1980s, and find that it has caused USA unemployment to systematically fluctuate around 2 percentage points above what it would otherwise have done. We call for a reappraisal of the way financial markets work, and stress the vital need of preventing financial devices that result in productive investment crowding-out.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1111/sjpe.2014.61.issue-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Investment Crowding-Out and Labor Market Effects of Financialization in the U.S (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:61:y:2014:i:5:p:589-613

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0036-9292

Access Statistics for this article

Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

More articles in Scottish Journal of Political Economy from Scottish Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().