How does financialisation affect functional income distribution? A theoretical clarification and empirical assessment

Karsten Köhler (), Alexander Guschanski () and Engelbert Stockhammer
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Karsten Köhler: Berlin School of Economics and Law, Postal: Berlin School of Economics and Law, Badensche Str. 52, 10825 Berlin;
Alexander Guschanski: University of Greenwich, Postal: University of Greenwich, SE10 9LS, London, UK;

No 2015-5, Economics Discussion Papers from School of Economics, Kingston University London

Abstract: While it is frequently asserted that financialisation has contributed to the decline in the wage share there are only few econometric studies, which usually focus on a single aspect of financialisation. This paper provides a theoretical clarification and a systematic empirical investigation. We identify four arguments why financialisation would affect the wage share: (1) a political economy approach focusing on the exit options of firms, (2) a neo-Kaleckian approach stressing the role of financial overhead costs for firms, (3) increased competition on capital markets stressed by neo-Marxian approaches and the critical shareholder value literature, 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 the theoretical hypotheses by a panel regression of 14 OECD countries over the 1989-2011 period. We find strong evidence for negative effects of household debt and evidence for negative effects of financial deregulation.

Keywords: financialisation; functional income distribution; panel regression (search for similar items in EconPapers)
JEL-codes: E25 F65 G34 G35 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2015-06-22
New Economics Papers: this item is included in nep-hme, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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