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Global Finance, Labor Politics, and the Political Economy of Housing Prices

Author

Listed:
  • Alison Johnston

    (Oregon State University)

  • Aidan Regan

    (University College Dublin)

Abstract

International political economy identifies declining nominal interest rates, securitization, and financial liberalization as drivers of rising housing prices. Despite witnessing these common credit shocks, however, developed economies experienced divergent trends in housing inflation since the 1980s. We offer a comparative political economy explanation of variation in house prices, arguing that by restraining household incomes, wage-setting institutions can blunt financial liberalization’s inflationary impact on housing markets. Employing quantitative analysis and a comparative study of Ireland and the Netherlands, we uncover two findings. First, countries where political coalitions in the export sector held veto powers over those in the nontraded sector in national wage setting realized lower housing inflation. Second, the impact of sectoral coalitions on housing prices in OECD countries is similar to that of financial variables. Our results suggest that the organization of labor politics continues to play an important role in mitigating the destabilizing effects of global finance on developed economies.

Suggested Citation

  • Alison Johnston & Aidan Regan, 2017. "Global Finance, Labor Politics, and the Political Economy of Housing Prices," Politics & Society, , vol. 45(3), pages 327-358, September.
    • Handle: RePEc:sae:polsoc:v:45:y:2017:i:3:p:327-358
    DOI: 10.1177/0032329217702102
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    Cited by:

    1. Greg Fuller & Alison Johnston & Aidan Regan, 2018. "Bringing the Household Back in. Comparative Capitalism and the Politics of Housing Markets," Working Papers 201807, Geary Institute, University College Dublin.
    2. Engelbert Stockhammer & Karsten Kohler, 2019. "Financialization and demand regimes in advanced economies," Working Papers PKWP1911, Post Keynesian Economics Society (PKES).
    3. James Wood & Engelbert Stockhammer, 2020. "House prices, private debt and the macroeconomics of comparative political economy," Working Papers PKWP2005, Post Keynesian Economics Society (PKES).

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