The impact of financialisation on the wage share: a theoretical clarification and empirical test

Karsten Kohler, Alexander Guschanski and Engelbert Stockhammer

Cambridge Journal of Economics, 2019, vol. 43, issue 4, 937-974

Abstract: It is frequently asserted that financialisation has contributed to the decline in the wage share. This paper provides a theoretical clarification and a systematic empirical investigation. We identify four channels through which financialisation can affect the wage share: (i) enhanced exit options of firms; (ii) rising price mark-ups due to financial overhead costs for businesses; (iii) increased competition on capital markets and (iv) the role of household debt in increasing workers’ financial vulnerability and undermining their class consciousness. The paper compiles a comprehensive set of empirical measures of financialisation and uses it to test these hypotheses with a panel regression of 14 advanced countries over the 1992–2014 period. We find strong evidence for negative effects of financial liberalisation and financial payments of non-financial corporations on the wage share, which are in the same order of magnitude as the effects of globalisation.

Keywords: Financialisation; Income distribution; Political economy; Corporate governance (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (47)

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Working Paper: The impact of financialisation on the wage share: A theoretical clarification and empirical test (2019)
Working Paper: The impact of financialisation on the wage share: a theoretical clarification and empirical test (2018)
Working Paper: The impact of financialisation on the wage share. A theoretical clarification and empirical test (2018)
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