Kohler, Karsten, Guschanski, Alexander and Stockhammer, Engelbert (2018) The impact of financialisation on the wage share : a theoretical clarification and empirical test. (Discussion Paper) Kingston, U.K. : School of Law, Social and Behavioural Sciences. 41 p. (Economics Discussion Papers, no. 2018-1)
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.
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