Income distribution, growth and financialization: the Italian case
The paper investigates whether the current decline of the Italian economy could be traced back to financialization. In principle financialization could not be so important for an economy in which many firms are not quoted in the stock exchange and for which shareholders' interests should not matter. The author argues that financialization may have deep effects in such an environment by changing the perceived financial norm and the target return on capital. The author draws on a model by Lavoie (1995) extending it to an open economy. She uses this model by looking at the effects of an appreciation, thus replicating the appreciation of the euro in the last years and its possible effects on the Italian economy. The results of such an appreciation would be a fall in the rate of growth, accumulation and in the realized rate of profit. This picture, however, does not fit in well with some stylized facts. In Italy, the rate of growth and the capital accumulation have slowed down while the rate of profit and the profit share have clearly increased. The increase concerns the average profit share and the average profit rate while indeed the profit rate is declining in the manufacturing sectors, but rising in the services sector. At this point a different interpretation is presented, which is no more based on the financialization hypothesis but rather on the increase in the degree of monopoly power in the Italian industrial sectors, given the increase in the mark-up. This process would have been favoured by the privatization process of previously public enterprises. The author shows what might have happened by using a model by Dutt (1995) with two sectors. In this model in the long-run the accumulation of capital is still governed by aggregated utilization and profitability, but the allocation of capital among sectors and their growth depends on the profit rate differential. The profit rate differential might have shifted resources to the service sectors, which would have been favoured by the privatization process. In this case, financialization would be a consequence of the increase in monopolistic competition, which in turn could be responsible for the decline.
|Date of creation:||Apr 2011|
|Date of revision:||Apr 2011|
|Contact details of provider:|| Postal: Via Crescimbeni, 20 -62100 Macerata|
Web page: http://www2.unimc.it/dief
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marc Lavoie, 2003. "Kaleckian Effective Demand and Sraffian Normal Prices: Towards a reconciliation," Review of Political Economy, Taylor & Francis Journals, vol. 15(1), pages 53-74.
- Massimo Pivetti, 2007. "Distribution, Inflation and Policy Analysis," Review of Political Economy, Taylor & Francis Journals, vol. 19(2), pages 243-247.
- Leonardo Vera, 2006. "Representative agent meets class structure: imperfect competition and the balanced-budget multiplier," Cambridge Journal of Economics, Oxford University Press, vol. 30(5), pages 783-796, September.
- Lavoie, M. & Ramirez-Gaston, P., 1993.
"Traverse in a Two-Sector Kaleckian Model of growth with Target Return Pricing,"
9308e, University of Ottawa, Department of Economics.
- Lavoie, Marc & Ramirez-Gaston, Pablo, 1997. "Traverse in a Two-Sector Kaleckian Model of Growth with Target-Return Pricing," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(2), pages 145-69, March.
- F. Daveri & C. Jona-Lasinio, 2006.
"Italy’s decline: getting the facts right,"
Economics Department Working Papers
2006-EP01, Department of Economics, Parma University (Italy).
- Lavoie, M., 1993.
"Interest Rates in Post-Keynesian Models of Growth and Distribution,"
9314e, University of Ottawa, Department of Economics.
- Marc Lavoie, 1995. "Interest Rates In Post-Keynesian Models Of Growth And Distribution," Metroeconomica, Wiley Blackwell, vol. 46(2), pages 146-177, 06.
- repec:mul:je8794:doi:10.1429/25713:y:2007:i:3:p:321 is not listed on IDEAS
- Lavoie, M., 1992.
"The Kaleckian Model of Growth and Distribution and its Neo-Ricardian and Neo-Marxian Critiques,"
9201e, University of Ottawa, Department of Economics.
- Lavoie, Marc, 1995. "The Kaleckian Model of Growth and Distribution and Its Neo-Ricardian and Neo-Marxian Critiques," Cambridge Journal of Economics, Oxford University Press, vol. 19(6), pages 789-818, December.
- Peter Skott & Soon Ryoo, 2007.
"Macroeconomic implications of financialization,"
UMASS Amherst Economics Working Papers
2007-08, University of Massachusetts Amherst, Department of Economics.
- Engelbert Stockhammer, 2006. "Shareholder value orientation and the investment-profit puzzle," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(2), pages 193-215, January.
- Roberto Torrini, 2005.
"Profit Share and Returns on Capital Stock in Italy: the Role of Privatisations behind the Rise of the 1990s,"
CEP Discussion Papers
dp0671, Centre for Economic Performance, LSE.
- Roberto Torrini, 2005. "Profit share and returns on capital stock in Italy: the role of privatisations behind the rise of the 1990s," LSE Research Online Documents on Economics 19915, London School of Economics and Political Science, LSE Library.
- Levrero Enrico Sergio & Stirati Antonella, 2005. "Distribuzione del reddito e prezzi relativi in Italia 1970-2002," Politica economica, Società editrice il Mulino, issue 3, pages 401-434.
- Michel Aglietta & Régis Breton, 2001. "Financial systems, corporate control, and capital accumulation," Post-Print halshs-00256788, HAL.
- Eckhard Hein & Till van Treeck, 2007. "'Financialisation' in Kaleckian/Post-Kaleckian models of distribution and growth," IMK Working Paper 07-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Dutt, Amitava Krishna, 1997. "Profit-Rate Equalization in the Kalecki-Steindl Model and the "Over-Determination" Problem," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(4), pages 443-51, September.
- Blecker, Robert A, 1989. "International Competition, Income Distribution and Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 13(3), pages 395-412, September.
When requesting a correction, please mention this item's handle: RePEc:mcr:wpdief:wpaper00065. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvana Tartufoli)
If references are entirely missing, you can add them using this form.