Analysis of the Relationship between Financialization and Wage Share: The Case of Turkey

The concept of financialization expresses the point reached by the financial sector through liberalization with the implementation of neo-liberal policies in the post-1980 period, and it has become a subject of recent studies. Studies focusing on the effect of financialization, especially on the distorting effect of income distribution, reveal that this factor is neglected in mainstream studies. The phenomenon of financialization, which first emerged in developed countries and then emerged in developing countries, changes the behavior patterns of companies, households and the state and plays the role of displacing the dynamics of today's capitalism. In this context, this study investigates the effect of financialization on the wage share in national income in Türkiye in the period of 1988-2019 with the time series analysis. The financialization index, which is used to represent financialization in the analysis, was originally obtained by using Principal Components Analysis within the scope of this study. According to the results of the analysis in which the ARDL cointegration approach is used, financialization in Türkiye plays a role in the erosion of the wage share after technological development and trade openness variables. Thus, according to the results, the transformation of the financial sector, which is largely exempt from regulations to financialization, has a distorting effect on the functional income distribution for the Turkish economy.