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

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

Kohler, Karsten, Guschanski, Alexander ORCID: 0000-0002-7818-8264 and Stockhammer, Engelbert (2019) The impact of financialisation on the wage share: A theoretical clarification and empirical test. Cambridge Journal of Economics, 43 (4). pp. 937-974. ISSN 0309-166X (Print), 1464-3545 (Online) (doi:https://doi.org/10.1093/cje/bez021)

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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 (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 nonfinancial corporations on the wage share that are in the same order of magnitude as the effects of globalisation.

Item Type: Article
Uncontrolled Keywords: financialization, income distribution, political economy, corporate governance
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 20 Aug 2019 09:07
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: GREAT 1
URI: http://gala.gre.ac.uk/id/eprint/23472

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