Determinants of labour’s income share in the era of financialisation
Abstract
Numerous studies have analysed the decline in the labour share of income, but only few have linked it to the increase in financialisation. The process of financialisation can roughly be described as an increasing importance of the financial sector that had an impact on the distribution between wages and profits, on the one hand, and retained earnings and financial income in the form of dividends and interests, on the other hand. This article seeks to explore the relationship between financialisation and labour’s share of income using a time-series cross-sectional dataset of 13 countries over the time period from 1986 until 2007. The results suggest that there is indeed a relationship between increasing dividend and interest payments of non-financial corporations and the decline of the share of wages in national income. Other factors that can account for the decline relate to globalisation and a decrease in the bargaining power of labour.
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Dünhaupt (2017) finds a negative relationship between the labor share of national income and financialization measured by interest payments and dividend payments relative to GDP for 13 OECD countries over 1986-2007.
“Dünhaupt (2017) also finds a negative relationship between the labor share of national income and financialization (measured by interest payments and dividend payments relative to GDP) for 13 OECD countries for the 1986-2007 period.”
From Financialization and the Labor Share of Income (2019) · cites this paper as Dünhaupt (2017)
There might be two ways in which the labor share of national income can be affected by FDI outflows: outsourced well-paid manufacturing jobs can be compensated by more supervisory jobs, and the threat effect might not be accounted for in the data, which underestimates the actual effect of FDI outflows on income disparities.
“As Dünhaupt (2017: 297) classifies, there might be two ways in which the labor share of national income can be affected by FDI outflows.”
From Financialization and the Labor Share of Income (2019) · cites this paper as Dünhaupt (2017: 297)
The pressure non-financial firms experience regarding debt repayments and/or boosting share prices very often leads them to shift these costs to workers via wage cuts.
“Third, simultaneously, the pressure non-financial firms experience regarding debt repayments and/or boosting share prices very often leads them to shift these costs to workers via wage cuts”
From Mapping modern economic rents: the good, the bad, and the grey areas (2023) · cites this paper as Dünhaupt, 2017
As the financial position of firms worsens due to rising corporate debt ratios needed to maintain high share prices and dividend payments, firm managers in countries with flexible labour markets will squeeze wages as a means of decreasing costs.
“As the financial position of firms worsens due to the rising corporate debt ratios needed to maintain high share prices and dividend payments, firm managers (in countries with flexible labour markets) will squeeze wages as a means of decreasing costs (Alvarez, 2015;Dünhaupt, 2017;Kohler et al., 2019).”
From Mapping modern economic rents: the good, the bad, and the grey areas (2023) · cites this paper as Dünhaupt, 2017
Cites
What To Do (and Not to Do) with Time-Series Cross-Section Data
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Maximizing shareholder value: a new ideology for corporate governance
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The Macroeconomics of Finance-Dominated Capitalism – and its Crisis
Hein, E. (2012) · doi:10.4337/9781781009161 · Cited by 317 · see citing works
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Mapping modern economic rents: the good, the bad, and the grey areas
Mazzucato, M., Ryan-Collins, J., & Gouzoulis, G. (2023) · Cambridge Journal of Economics · doi:10.1093/cje/bead013 · Cited by 54 · see citing works
Financialization and the Labor Share of Income
Özdemir, O. (2019) · Review of Economic Perspectives · doi:10.2478/revecp-2019-0015 · Cited by 7 · see citing works
“Deviating from the previous empirical studies such as Dünhaupt (2017), I use Driscoll and Kraay‘s (1998) method to examine the linear relationship between financialization and the labor share of national 14 Many of these countries are classified as the advanced economies in terms of their aggregate…”
BackgroundMethod
- Authors
- Dünhaupt, P.
- Affiliations
- Berlin School of Economics and Law (DE)
- Corresponding author
- Dünhaupt, Petra
- ORCID
- Dünhaupt, Petra
- Venue
- Cambridge Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 2016-07-06
- Volume
- 41
- Issue
- 1
- Pages
- 283-306
- ISSN
- 0309-166X (ISSN-L)
- 1464-3545
- OpenAlex
- W2469814081
- Cited by
- 133
- References
- 4
- Citations by year
- 2026: 9 · 2025: 15 · 2024: 9 · 2023: 16 · 2022: 9 · 2021: 20 · 2020: 17 · 2019: 18 · 2018: 10 · 2017: 10
- FWCI
- 21.15
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Cambridge Journal of Economics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- HighWire Press Open Archive (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Housing, Finance, and Neoliberalism
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Keywords
- labor share, financialization, wages, dividends, interest payments, non-financial firms, globalization, income distribution, financial services
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