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Finance-dominated capitalism and income distribution: a Kaleckian perspective on the case of Germany

Author

Listed:
  • Eckhard Hein

    (Berlin School of Economics and Law and Institute for International Political Economy)

  • Daniel Detzer

    (Berlin School of Economics and Law and Institute for International)

Abstract

We present an investigation into the long-run effects of financialisation on income distribution before the financial and economic crises for Germany, one of the major mercantilist export-led economies. The analysis builds on a Kaleckian approach towards the examination of the effects of financialisation on income distribution, as suggested by Hein (2014a). First, we show that Germany saw considerable re-distribution of income starting in early 1980s, which accelerated in the early 2000s, in particular. Examining the three main channels through which financialisation (and neo-liberalism) are supposed to have affected the wage or the labour income share, according to the Kaleckian approach, we provide evidence for the existence of each of these channels in Germany since the mid- 1990s, when several institutional changes provided the conditions for an increasing dominance of finance.

Suggested Citation

  • Eckhard Hein & Daniel Detzer, 2014. "Finance-dominated capitalism and income distribution: a Kaleckian perspective on the case of Germany," Working papers wpaper62, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  • Handle: RePEc:fes:wpaper:wpaper62
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    References listed on IDEAS

    as
    1. Philip Arestis & Eckhard Hein & Edwin Le Héron, 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Post-Print halshs-00155170, HAL.
    2. Detzer, Daniel & Hein, Eckhard, 2014. "Finance-dominated capitalism in Germany: Deep recession and quick recovery," IPE Working Papers 39/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    3. Till Treeck, 2014. "Did Inequality Cause The U.S. Financial Crisis?," Journal of Economic Surveys, Wiley Blackwell, vol. 28(3), pages 421-448, July.
    4. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
    5. Petra Duenhaupt, 2012. "Financialization and the rentier income share -- evidence from the USA and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(4), pages 465-487, June.
    6. A. B. Atkinson, 2009. "Factor shares: the principal problem of political economy?," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 3-16, Spring.
    7. Jorg Bibow, 2005. "Germany in crisis: the unification challenge, macroeconomic policy shocks and traditions, and EMU," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 29-50.
    8. Palma, J.G., 2009. "The Revenge of the Market on the Rentiers: Why neo-liberal Reports of the end of history turned out to be premature (Updated 19 December 2011)," Cambridge Working Papers in Economics 0927, Faculty of Economics, University of Cambridge.
    9. van Treeck, Till. & Sturn, Simon., 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 994709343402676, International Labour Organization.
    10. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931, June.
    11. Daniel Detzer, 2015. "Inequality and the Financial System— The Case of Germany," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 585-608.
    12. Thomas I. Palley, 2007. "Financialization: What It Is and Why It Matters," Working Papers wp153, Political Economy Research Institute, University of Massachusetts at Amherst.
    13. Eckhard Hein & Achim Truger, 2006. "Germany's post-2000 stagnation in the European context - a lesson in macroeconomic mismanagement," IMK Working Paper 03-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    14. Eckhard Hein, 2015. "Finance-dominated capitalism and re-distribution of income: a Kaleckian perspective," Cambridge Journal of Economics, Oxford University Press, vol. 39(3), pages 907-934.
    15. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    16. Markus M. Grabka & Jan Goebel, 2014. "Reduction in Income Inequality Faltering," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 4(1), pages 16-25.
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    18. Philip Arestis & Eckhard Hein & Edwin Le Heron (ed.), 2007. "Aspects of Modern Monetary and Macroeconomic Policies," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, number 9b-2007, January.
    19. repec:ilo:ilowps:470934 is not listed on IDEAS
    20. Dünhaupt, Petra, 2013. "The effect of financialization on labor's share of income," IPE Working Papers 17/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    21. Jorg Bibow, 2003. "On the 'burden' of German unification," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 137-169.
    22. Robert Wade, 2009. "From global imbalances to global reorganisations," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 539-562, July.
    23. Milka Kazandziska, 2015. "Macroeconomic policy regime in Poland," Working Papers 59/2015, Institute of Economic Research, revised Apr 2015.
    24. Jorg Bibow, 2003. "On the 'burden' of German unification," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 137-169.
    25. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2009. "From Bottom To Top: The Entire Income Distribution In Germany, 1992-2003," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 303-330, June.
    26. Eckhard Hein & Achim Truger, 2009. "How to Fight (or Not to Fight) a Slowdown," Challenge, Taylor & Francis Journals, vol. 52(3), pages 52-75.
    27. Romain Ranciere & Nathaniel A. Throckmorton & Michael Kumhof & Claire Lebarz & Alexander W. Richter, 2012. "Income Inequality and Current Account Imbalances," IMF Working Papers 12/8, International Monetary Fund.
    28. Daniel Detzer & Nina Dodig & Trevor Evans & Eckhard Hein & Hansjörg Herr, 2013. "Studies in Financial Systems No 3 The German Financial System," FESSUD studies fstudy03, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    29. repec:ilo:ilowps:470932 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Eckhard Hein & Petra Dünhaupt & Ayoze Alfageme & Marta Kulesza, 2017. "Financialisation and distribution in three main Eurozone countries from a Kaleckian perspective: the US, the UK and Sweden compared – before and after the crisis," Working Papers 9/17, Sapienza University of Rome, DISS.
    2. Eckhard Hein, 2015. "Causes and Consequences of the Financial Crisis and the Implications for a More Resilient Financial and Economic System: Synthesis of FESSUD Work Package 3," Working papers wpaper128, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    3. Daniel Detzer, 2015. "Inequality and the Financial System— The Case of Germany," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 585-608.
    4. Dünhaupt, Petra & Hein, Eckhard, 2018. "Financialisation, distribution & the macroeconomic regimes before & after the crisis: A post-Keynesian view on Denmark, Estonia & Latvia," IPE Working Papers 104/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. Eckhard Hein & Petra Dünhaupt & Ayoze Alfageme & Marta Kulesza, 2017. "Financialisation and distribution in three main Eurozone countries from a Kaleckian perspective: France, Germany and Spain compared – before and after the crisis," Working Papers 8/17, Sapienza University of Rome, DISS.
    6. Hein, Eckhard & Dünhaupt, Petra & Alfageme, Ayoze & Kulesza, Marta, 2017. "Financialisation and distribution in the US, the UK, Spain, Germany, Sweden and France: Before and after the crisis," IPE Working Papers 85/2017, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    7. Herr, Hansjörg, 2018. "Karl Marx's thoughts on functional income distribution - a critical analysis," IPE Working Papers 101/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    8. Hein, Eckhard, 2016. "Causes and consequences of the financial crisis and the implications for a more resilient financial and economic system," IPE Working Papers 61/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    More about this item

    Keywords

    Finance-dominated capitalism; distribution of income; Kaleckian distribution theory; Germany;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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