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Financialization and its impact on processof deindustrialization in the EU

Author

Listed:
  • Tonæi Svilokos

    (University of Dubrovnik, Department of Economics and Business Economics, Lapadska obala 7, Dubrovnik, Croatia)

  • Ivan Burin

    (Airport Dubrovnik,Dobrota 24, Mioèiæi, 20213 Èilipi, Croatia)

Abstract

The aim of this research is to examine whether and to what extent the process of financialization has an impact on the process of deindustrialization in the European Union, employing a fixed-effect panel regression model. In this paper exogenous explanatory variable that indicates the level of financialization is presented by the value added of the finance sector as a percentage of total value added, and by the employment in the finance sector as a percentage of total employment. In a process of deindustrialization, the industrial activity is usually replaced by service activities. However, situations where the service sector has not been able to absorb the additional supply of labour and to produce additional values that would compensate the reduction in the industrial sector, could have led to higher unemployment and lower economic growth. In this paper, deindustrialization is measured by the value added of industry sector as a percentage of total value added, and by the employment in industry as a percentage of total employment. Using latest panel data from EUROSTAT and ILO for the period from 1995 to 2015 author detects the significant and negative impacts of the process of financialization on value added of industry sector, as well as on the employment in the industry sector. This supports the conclusion that the process of deindustrialization of the EU countries can be characterized as a financializationled process.

Suggested Citation

  • Tonæi Svilokos & Ivan Burin, 2017. "Financialization and its impact on processof deindustrialization in the EU," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 35(2), pages 583-610.
    • Handle: RePEc:rfe:zbefri:v:35:y:2017:i:2:p:583-610
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    References listed on IDEAS

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    More about this item

    Keywords

    deindustrialization; financialization; value added; unemployment; fixedeffect; panel regression model;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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