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Some New Insights on Financialisation and Income Inequality

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  • Marwil J. Dávila-Fernández
  • Lionello F. Punzo

Abstract

In this paper, we study the relationship between income distribution and financialisation in the United States after the Second World War. Financialisation is introduced as a two-fold process. On the one hand, it can be understood as an increase in the contribution of the financial sector regarding the composition of production, or a flow dimension. On the other hand, we can see it as an increase in the importance of financial assets in terms of the composition of wealth, or a stock dimension. We make use of the share of financial employment on total employment as a proxy of the first dimension while wealth composition is measured as the share of financial assets on corporations' total assets. Applying cointegration techniques, we identied a positive long-run relationship between financialisation and income inequality. Causality goes from the flow dimension to inequality and from inequality to the stock dimension.

Suggested Citation

  • Marwil J. Dávila-Fernández & Lionello F. Punzo, 2018. "Some New Insights on Financialisation and Income Inequality," Department of Economics University of Siena 792, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:792
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    More about this item

    Keywords

    Financialisation; Income inequality; Wealth; United States.;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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