The Political Economy of Corporate Control and Labor Rents
In a democracy, a political majority can influence both the corporate governance structure and the return to human and financial capital. We argue that when financial wealth is sufficiently concentrated, there is political support for high labor rents and a strong governance role for banks or large investors. The model is consistent with the "great reversal" phenomenon in the first half of the twentieth century. We offer evidence that in several financially developed countries a financially weakened middle class became concerned about labor income risk associated with free markets and supported a more corporatist financial system.
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References listed on IDEAS
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- Shiller, Robert J., 1998. "Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks," OUP Catalogue, Oxford University Press, number 9780198294184.
- Raghuram Rajan & Luigi Zingales, 2003. "The Emergence of Strong Property Rights: Speculation from history," NBER Working Papers 9478, National Bureau of Economic Research, Inc.
- Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
- Dani Rodrik, 1998.
"Why Do More Open Economies Have Bigger Governments?,"
Journal of Political Economy,
University of Chicago Press, vol. 106(5), pages 997-1032, October.
- Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
- Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
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