Financialisation and distribution in the US, the UK, Spain, Germany, Sweden and France: Before and after the crisis

In this paper we analyse the effects of financialisation on income distribution, before and after the Great Financial Crisis and the Great Recession. The focus is on functional income distribution and thus on the relationship between financialisation and the wage share or the gross profit share. The analysis is based on a Kaleckian theory of income distribution adapted to the conditions of financialisation. Financialisation may thus affect aggregate wage or gross profit shares of the economy as a whole through three channels: first, the sectoral composition of the economy, second the financial overhead costs and profit claims of the rentiers, and third the bargaining power of workers and trade unions. We examine empirical indicators for each of these channels for six OECD economies, both before and after the crisis. The country set contains the 'private demand boom' economies before the crisis, the US, the UK, and Spain, the 'export-led mercantilist' economies Germany and Sweden, and France representing a 'domestic demand-led' economy. We find that these countries have shown broad similarities regarding redistribution before the crisis, however, with major differences in the underlying determinants. These differences have carried through to the period after the crisis and have led to different results regarding the development of distribution since then.