Inequality, financialisation and economic decline

The objective of this paper is to argue that the labour productivity decline experienced in recent years by several advanced countries can be explained, following a Kaldorian-Classical approach, by a weak GDP performance and by a decline in the wage share. Moreover, drawing inspiration from recent Post- Keynesian literature, we identify the ongoing worsening in income equality and the increase in the degree of financialisation as other major explanatory factors of sluggish productivity. The paper will provide a brief literature review concerning non-mainstream attempts to endogenise labour productivity. We will then discuss how labour flexibility and shareholder value orientation, one of the main aspects of financialisation, can negatively affect equality and labour productivity. Finally, we will propose and test an extended version of Sylos Labini’s productivity equation, where productivity is claimed to depend positively on GDP rate of growth and the wage share, and negatively on income inequality and financialisation.