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

Karsten Kohler, Alexander Guschanski and Engelbert Stockhammer

No PKWP1802, Working Papers from Post Keynesian Economics Society (PKES)

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: (1) enhanced exit options of firms; (2) rising price mark-ups due to financial overhead costs for businesses; (3) increased competition on capital markets and shareholder value orientation; and (4) 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 OECD 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 that are in the same order of magnitude as the effects of globalisation.

Keywords: financialization; income distribution; political economy (search for similar items in EconPapers)
JEL-codes: E25 F65 (search for similar items in EconPapers)
Pages: 39
Date: 2018-01
New Economics Papers: this item is included in nep-hme, nep-mac and nep-pke
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Citations: View citations in EconPapers (7)

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https://postkeynesian.net/media/working-papers/PKWP1802_MQ1APLF.pdf First version, 2018 (application/pdf)

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