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

Karsten Kohler; Alexander Guschanski; Engelbert Stockhammer

doi:10.1093/cje/bez021

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

Karsten Kohler, Alexander Guschanski, Engelbert Stockhammer

University of Greenwich

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67 Citations (Scopus)

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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 non-financial corporations on the wage share that are in the same order of magnitude as the effects of globalisation.

Original language	English
Pages (from-to)	937–974
Journal	CAMBRIDGE JOURNAL OF ECONOMICS
Volume	43
Issue number	4
Early online date	25 Jul 2019
DOIs	https://doi.org/10.1093/cje/bez021
Publication status	Published - Jul 2019

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

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