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Distributional Consequences of Capital Accumulation, Globalisation and Financialisation in the US

Author

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  • Karanassou, Marika

    () (Queen Mary, University of London)

  • Sala, Hector

    () (Universitat Autònoma de Barcelona)

Abstract

In this paper we examine the dynamic contributions of capital accumulation, globalisation, and financialisation to the functional-personal income distribution nexus. We analyse the labour share under the prism of monopoly and frictional growth, and disclose the dramatic upward trend in inequality. On this basis, we estimate a two-equation model for the income distribution in the US over the 1960-2009 period. We show that the labour share is affected positively by capital intensity and negatively by trade, while the Gini statistic is fueled by the falling labour share and increasing financial payments. Using counterfactual simulations, a key finding is that the decrease in capital intensity in the eighties accounted for about 76% of the labour share fall, while its increase in the 2000s prevented inequality from worsening three times more than it actually did. In turn, had financialisation not increased after 2005, inequality would have decreased to its level in the early noughties. In the Great Recession years of tense socioeconomic conditions, looking at income distribution through the lens of the wage-productivity gap could enlighten economic policy.

Suggested Citation

  • Karanassou, Marika & Sala, Hector, 2013. "Distributional Consequences of Capital Accumulation, Globalisation and Financialisation in the US," IZA Discussion Papers 7244, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7244
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    References listed on IDEAS

    as
    1. Marika Karanassou & Hector Sala & Pablo F. Salvador, 2008. "Capital accumulation and unemployment: new insights on the Nordic experience," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 977-1001, November.
    2. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
    3. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2009. "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data," Working Papers 09-26, Center for Economic Studies, U.S. Census Bureau.
    4. William Milberg & Deborah Winkler, 2010. "Financialisation and the dynamics of offshoring in the USA," Cambridge Journal of Economics, Oxford University Press, vol. 34(2), pages 275-293, March.
    5. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    6. Marika Karanassou & Hector Sala & Dennis J. Snower, 2010. "Phillips Curves And Unemployment Dynamics: A Critique And A Holistic Perspective," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 1-51, February.
    7. Ozgür Orhangazi, 2008. "Financialisation and capital accumulation in the non-financial corporate sector:," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 863-886, November.
    8. Marika Karanassou & Hector Sala, 2012. "Inequality and Employment Sensitivities to the Falling Labour Share," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 343-376.
    9. Olivier Blanchard, 2009. "The State of Macro," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 209-228, May.
    10. Karanassou, Marika & Sala, Hector, 2010. "The US inflation-unemployment trade-off revisited: New evidence for policy-making," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 758-777, November.
    11. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-393, December.
    12. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    13. Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Oxford University Press, vol. 28(5), pages 719-741, September.
    14. William Milberg & Deborah Winkler, 2010. "Economic insecurity in the new wave of globalization: offshoring and the labor share under varieties of capitalism," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(3), pages 285-308.
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    Cited by:

    1. Dario JUDZIK & Hector SALA, 2013. "Productivity, deunionization and trade: Wage effects and labour share implications," International Labour Review, International Labour Organization, vol. 152(2), pages 205-236, June.

    More about this item

    Keywords

    income distribution; labour share; wage gap; inequality; capital intensity; financialisation; trade;

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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