IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/41421.html
   My bibliography  Save this paper

The growing dichotomy between real and financial sectors

Author

Listed:
  • Roy Trivedi, Smita

Abstract

The paper contends that the economic growth process around the world has seen a growing dichotomy between real and financial sectors in the last four decades. There has been a marked stagnation in the real sector with falling growth and productivity levels, worsening physical investment and employment growth and dwindling saving rates. In contrast, the financial sector has seen a huge appreciation in financial assets and growing income from ownership of financial capital. The paper highlights the paradoxical coexistence of real sector stagnation with financial sector explosion.

Suggested Citation

  • Roy Trivedi, Smita, 2011. "The growing dichotomy between real and financial sectors," MPRA Paper 41421, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41421
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/41421/1/MPRA_paper_41421.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Martin Neil Baily & Douglas J. Elliott, 2011. "The Causes of the Financial Crisis and the Impact of Raising Capital Requirements," World Scientific Book Chapters, in: Asli Demirgüç-Kunt & Douglas D Evanoff & George G Kaufman (ed.), The International Financial Crisis Have the Rules of Finance Changed?, chapter 6, pages 59-71, World Scientific Publishing Co. Pte. Ltd..
    2. Sharon Kozicki, 1997. "The productivity growth slowdown: diverging trends in the manufacturing and service sectors," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 31-46.
    3. James Crotty, 2007. "If Financial Market Competition is so Intense, Why are Financial Firm Profits so High? Reflections on the Current ‘Golden Age’ of Finance," Working Papers wp134, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," The World Bank Economic Review, World Bank Group, vol. 10(2), pages 291-321, May.
    5. Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Oxford University Press, vol. 28(5), pages 719-741, September.
    6. Robert Gordon, 1995. "Problems in the Measurement and Performance of Service-Sector Productivity in the United States," RBA Annual Conference Volume (Discontinued), in: Palle Andersen & Jacqueline Dwyer & David Gruen (ed.),Productivity and Growth, Reserve Bank of Australia.
    7. Thomas I. Palley, 2006. "Class Conflict and the Cambridge Theory of Income Distribution," Palgrave Macmillan Books, in: Eckhard Hein & Arne Heise & Achim Truger (ed.), Wages, Employment, Distribution and Growth, chapter 10, pages 223-246, Palgrave Macmillan.
    8. Nordhaus, William D., 1982. "Economic policy in the face of declining productivity growth," European Economic Review, Elsevier, vol. 18(1), pages 131-157.
    9. Edward N. Wolff, 1999. "The productivity paradox: evidence from indirect indicators of service sector productivity growth," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 281-308, April.
    10. Till van Treeck, 2009. "A synthetic, stock--flow consistent macroeconomic model of 'financialisation'," Cambridge Journal of Economics, Oxford University Press, vol. 33(3), pages 467-493, May.
    11. Eckhard Hein & Arne Heise & Achim Truger (ed.), 2006. "Wages, Employment, Distribution and Growth - International Perspectives," Conference proceedings of the Research Network Macroeconomics and Macroeconomic Policies (FMM), IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute, number 8a-2006, July.
    12. Dorothy Power & Gerald Epstein, 2003. "Rentier Incomes and Financial Crises: An Empirical Examination of Trends and Cycles in Some OECD Countries," Working Papers wp57, Political Economy Research Institute, University of Massachusetts at Amherst.
    13. Vicente Navarro & John Schmitt & Javier Astudillo, 2004. "Is globalisation undermining the welfare state?," Cambridge Journal of Economics, Oxford University Press, vol. 28(1), pages 133-152, January.
    14. World Bank, 2010. "Global Economic Prospects, January 2010," World Bank Publications - Books, The World Bank Group, number 2415, December.
    15. Eckhard Hein & Arne Heise & Achim Truger (ed.), 2006. "Wages, Employment, Distribution and Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37178-1, December.
    16. James Crotty, 2000. "Slow Growth, Destructive Competition, and Low Road Labor Relations: A Keynes-Marx-Schumpeter Analysis of Neoliberal Globalization," Working Papers wp6, Political Economy Research Institute, University of Massachusetts at Amherst.
    17. Matthew Abrena & Gerald Epstein & Dorothy Power, 2003. "Trends In The Rentier Income Share In OECD Countries, 1960-2000," Working Papers wp58a, Political Economy Research Institute, University of Massachusetts at Amherst.
    18. Nathalie Girouard & Mike Kennedy & Christophe André, 2006. "Has the Rise in Debt Made Households More Vulnerable?," OECD Economics Department Working Papers 535, OECD Publishing.
    19. William D. Nordhaus, 2004. "Retrospective on the Postwar Productivity Slowdown," Cowles Foundation Discussion Papers 1494, Cowles Foundation for Research in Economics, Yale University.
    20. Schmidt, Vivien A., 2002. "The Futures of European Capitalism," OUP Catalogue, Oxford University Press, number 9780199253685, Decembrie.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eckhard Hein, 2010. "Shareholder Value Orientation, Distribution And Growth—Short‐ And Medium‐Run Effects In A Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 61(2), pages 302-332, May.
    2. Parui, Pintu, 2021. "Financialization and endogenous technological change: A post-Kaleckian perspective," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 221-244.
    3. Eckhard Hein & Till van Treeck, 2010. "‘Financialisation’ in Post-Keynesian Models of Distribution and Growth: A Systematic Review," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 13, Edward Elgar Publishing.
    4. Eckhard Hein & Achim Truger, 2012. "Finance-dominated capitalism in crisis—the case for a global Keynesian New Deal," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(2), pages 187-213.
    5. Eckhard Hein, 2009. "A (Post-) Keynesian perspective on "financialisation"," IMK Studies 01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
    7. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Taylor & Francis Journals, vol. 40(2), pages 139-155, January.
    8. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931.
    9. Giorgos Argitis & Stella Michopoulou, 2013. "Studies in Financial Systems No 4 Financialization and the Greek Financial System," FESSUD studies fstudy04, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    10. Petra Duenhaupt, 2011. "The Impact of Financialization on Income Distribution in the USA and Germany: A Proposal for a New Adjusted Wage Share," IMK Working Paper 7-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    11. Gemzik-Salwach Agata & Perz Paweł, 2018. "Financialization in the Regional Aspect. An Attempt to Measure a Phenomenon," Central European Economic Journal, Sciendo, vol. 5(52), pages 56-66, January.
    12. Engelbert Stockhammer, 2012. "Financialization," Chapters, in: Jan Toporowski & Jo Michell (ed.), Handbook of Critical Issues in Finance, chapter 17, pages i-ii, Edward Elgar Publishing.
    13. Engelbert Stockhammer, 2010. "Financialization and the Global Economy," Working Papers wp240, Political Economy Research Institute, University of Massachusetts at Amherst.
    14. 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.
    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. Soon Ryoo & Peter Skott, 2008. "Financialization in Kaleckian Economies with and without Labor Constraints," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 5(2), pages 357-386.
    17. Eckhard Hein, 2009. "‘Financialisation’ in a comparative static, stock-flow consistent post-kaleckian distribution and growth model," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 72(03), pages 120-139.
    18. Hein, Eckhard & Dodig, Nina & Budyldina, Natalia, 2014. "Financial, economic and social systems: French Regulation School, Social Structures of Accumulation and Post-Keynesian approaches compared," IPE Working Papers 34/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    19. Botta, Alberto & Caverzasi, Eugenio & Tori, Daniele, 2020. "The Macroeconomics Of Shadow Banking," Macroeconomic Dynamics, Cambridge University Press, vol. 24(1), pages 161-190, January.
    20. Engelbert Stockhammer & Eckhard Hein & Lucas Grafl, 2011. "Globalization and the effects of changes in functional income distribution on aggregate demand in Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 1-23.

    More about this item

    Keywords

    Real sector stagnation; Financial sector dominance; Economic crisis;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:41421. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.