Financialisation, Financial Crisis and Inequality
This chapter outlines how the pace and structure of financialisation have differed over time and across countries, and also how income distribution (inequality of personal income, distribution between wages and profits) has proceeded with different time profiles and structures. This chapter outlines the nature and features of financialisation in the present era, and provides a summary of the main trends in income distribution and inequality over the past three decades. The links between the financial sector and inequality of income and earnings are explored, and specifically the extent of inequality within the financial sector and the degree to which inequality in the financial sector contributes to overall inequality. The evidence on the processes of financialisation and the distribution of income is reviewed. The ways in which financial deepening can impact on inequality and poverty are explored. The links between inequality and financial crisis and household debt are reviewed.
KeywordsFinancialisation Financial crisis Inequality Income distribution
JEL ClassificationG01 G20 D3
- Atkinson, A. B., & Morelli, S. (2011). Economic Crises and Inequality (Human Development Research Paper, 2011/06).Google Scholar
- Bakija, J., Cole, A., & Heim, B. T. (2012). Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from US Tax Returns Data. Williams College, US Department of Treasury and Indiana University.Google Scholar
- Bellettini, G., & Delbono, F. (2013). Persistence of High Income Inequality and Banking Crises: 1980–2010 (CESifo Working Paper, No. 4293).Google Scholar
- Bortz, P. G., & Kaltenbrunner, A. (2018). The International Dimension of Financialization in Developing and Emerging Economies. Development and Change, 49(2), 375–393. https://doi.org/10.1111.dech.12371.
- Brown, A., Spencer, D., & Veronese Passarella, M. (2017). The Extent and Variegation of Financialisation in Europe: A Preliminary Analysis. Revista de Economia Mundial [Journal of World Economy], 46, 49–69.Google Scholar
- Cardaci, A., & Saraceno, F. (2015). Inequality, Financialisation and Economic Crises: An Agent Based Macro Model (Working Paper 2015-21). Dipartimento di Economia, Universita degli di Milano.Google Scholar
- Demirguc-Kunt, A., & Levine, R. (2009). Finance and Inequality: Theory and Evidence (NBER Working Paper No. 15275). Cambridge, MA. Available online http://www.nber.org/papers/w15275.
- Denk, O. (2015). Financial Sector Pay and Labour Income Inequality: Evidence from Europe (OECD Economics Department Working Papers, No. 1225). Paris: OECD.Google Scholar
- Denk, O., & Cournède, B. (2015). Finance and Income Inequality in OECD Countries (OECD Economics Department Working Papers, No. 1224). Paris: OECD. http://dx.doi.org/10.1787/5js04v5jm2hl-en.
- Detzer, D., Dodig, N., Evans, T., Hein, E., & Herr, H. (2013). The German Financial System (FESSUD Studies in Financial Systems No. 3).Google Scholar
- Epstein, G. (2005). Introduction: Financialization and the World Economy. In G. Epstein (Ed.), Financialization and the World Economy. Cheltenham and Northampton: Edward Elgar.Google Scholar
- European Central Bank (ECB). (2017, May). Financial Integration in Europe.Google Scholar
- Evans, T. (2014). The Impact of Financial Liberalization on Income Inequality [Special Issue on The Challenge of Inequality]. International Journal of Labour Research, 6(1), 129–142.Google Scholar
- Fasianos, A., Guevara, D., & Pierros, C. (2018, January). Have We Been Here Before? Phases of Financialization Within the Twentieth Century in the US. Review of Keynesian Economics, 6(1), 34–61. https://doi.org/10.4337/roke.2018.01.03.
- Ferreiro, J., & Gómez, C. (2016). Financialisation and Financial Balance Sheets of Economic Sectors in the Eurozone. In P. Arestis & M. Sawyer (Eds.), Financial Liberalisation: Past, Present and Future. Annual Edition of International Papers in Political Economy. Houndmills and Basingstoke: Palgrave Macmillan.Google Scholar
- Hein, E., Dünhaupt, P., Alfageme, A., & Kulesza, M. (2017). Financialisation and Distribution Before and After the Crisis: Patterns for Six OECD Countries. In P. Arestis & M. Sawyer (Eds.), Economic Policies Since the Global Financial Crisis (pp. 127–172). Houndsmill: Palgrave Macmillan.CrossRefGoogle Scholar
- International Institute for Labour Studies (IILS). (2008). World of Work Report 2008: Income Inequalities in the Age of Financial Globalization. Geneva: International Labour Organization.Google Scholar
- Jessop, B. (2013). The North Atlantic Financial Crisis and Varieties of Capitalism: A Minsky and/or Marx Moment? And Perhaps Max Weber Too? In S. Fadda & P. Tridico (Eds.), Financial Crisis, Labour Markets and Institutions (pp. 40–59). London: Routledge.Google Scholar
- Kaltenbrunner, A., & Painceira, J. P. (2018). Subordinated Financial Integration and Financialisation in Emerging Capitalist Economies: The Brazilian Experience. New Political Economy, 23(3), 290–313. https://doi.org/10.1080/13563467.2017.1349089.
- Kay, J. (2015). Other People’s Money: Masters of the Universe or Servants of the People? London: Profile Books.Google Scholar
- Laeven, L., & Valencia, F. (2012). Systemic Banking Crises Database: An Update (IMF Working Papers, WP/12/163).Google Scholar
- Lindo, D. (2018). Why Derivatives Need Models: The Political Economy of Derivative Valuation Models. Cambridge Journal of Economics, 42(4), 987–1008. https://doi.org/10.1093/cje/bex055.
- Malinen, T. (2016). Does Income Inequality Contribute to Credit Cycles. Journal of Economic Inequality, 14, 309–325. https://doi.org/10.1007/s10888-016-9334-6.
- Michell, J. (2015). Income Distribution and the Financial and Economic Crisis. In E. Hein, D. Detzer, & N. Dodig (Eds.), The Demise of Finance-Dominated Capitalism Explaining the Financial and Economic Crises (pp. 240–264). Cheltenham: Edward Elgar.Google Scholar
- Rajan, R. (2010). Fault Lines. Princeton, NJ: Princeton University Press.Google Scholar
- Sawyer, M. (2014). Bank-Based Versus Market-Based Financial Systems: A Critique of the Dichotomy (FESSUD Working Papers, No. 19). Available at fessud.eu.
- Stockhammer, E. (2015a). Rising Inequality as a Root Cause of the Present Crisis. Cambridge Journal of Economics, 39, 935–958.Google Scholar
- Stockhammer, E. (2015b). Determinants of the Wage Share: A Panel Analysis of Advanced and Developing Economies. British Journal of Industrial Relations. Advance access https://doi.org/10.1111/bjir.12165.
- Tridico, P. (2018, forthcoming). The Determinants of Income Inequality in OECD countries. Cambridge Journal of Economics, 42(4), 1009–1042. https://doi.org/10.1093/cje/bex069.
- Tridico, P., & Pariboni, R. (2018). Theoretical and Empirical Analyses of the Rise of Income Inequality in Rich Countries. In P. Arestis & M. Sawyer (Eds.), Inequality: Trends, Causes, Consequences, Relevant Policies. Basingstoke: Palgrave Macmillan.Google Scholar
- UNCTAD. (2017). Trade and Development Report: Beyond Austerity Towards a Global New Deal. Geneva: UNCTAD.Google Scholar
- UNDP. (2017). Income Inequality Trends in Sub-Saharan Africa: Divergence, Determinants, Consequences. New York: UNDP.Google Scholar
- Van der Zwan, N. (2014). State of the Art: Making Sense of Financialization. Socio-Economic Review, 12, 99–129.Google Scholar
- Van Treeck, T., & Sturn, S. (2012). Income Inequality as a Cause of the Great Recession? A Survey of Current Debates (ILO Conditions of Work and Employment Series, No. 39).Google Scholar