IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/hal-03459520.html
   My bibliography  Save this paper

Financialization Is Marketization!

Author

Listed:
  • Olivier Godechot

    (OSC - Observatoire sociologique du changement (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we study the impact of financialization on the rise in inequality in 18 OECD countries from 1970 to 2011 and measure the respective roles of various forms of financialization: the growth of the financial sector; the growth of one of its subcomponents, financial markets; the financialization of non-financial firms; and the financialization of households. We test these impacts using cross-country panel regressions in OECD countries. As dependent measures we use Solt's (2009) Gini index, the World Top Incomes Database, and OECD inter-decile inequality measures. We show first that the share of the finance sector within the GDP is a substantial driver of world inequality, explaining between 20 and 40 percent of its increase from 1980 to 2007. When we decompose this financial sector effect, we find that this evolution was mainly driven by the increase in the volume of stocks traded in national stock exchanges and by the volume of shares held as assets in banks' balance sheets. By contrast, the financialization of non-financial firms and of households does not play a substantial role. Based on this inequality test, we therefore interpret financialization as being mainly a phenomenon of marketization, redefined as the growing amount of social energy devoted to the trade of financial instruments on financial markets.

Suggested Citation

  • Olivier Godechot, 2015. "Financialization Is Marketization!," SciencePo Working papers Main hal-03459520, HAL.
    • Handle: RePEc:hal:spmain:hal-03459520
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03459520
    as

    Download full text from publisher

    File URL: https://hal-sciencespo.archives-ouvertes.fr/hal-03459520/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Poon, Martha, 2009. "From new deal institutions to capital markets: Commercial consumer risk scores and the making of subprime mortgage finance," Accounting, Organizations and Society, Elsevier, vol. 34(5), pages 654-674, July.
    2. Ozgür Orhangazi, 2008. "Financialisation and capital accumulation in the non-financial corporate sector:," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(6), pages 863-886, November.
    3. repec:dau:papers:123456789/1499 is not listed on IDEAS
    4. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," American Economic Review, American Economic Association, vol. 105(3), pages 1217-1245, March.
    5. Martha Poon, 2009. "From New Deal institutions to capital markets: commercial consumer risk scores and the making of subprime mortgage finance," Post-Print halshs-00359712, HAL.
    6. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2016. "The great mortgaging: housing finance, crises and business cycles," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 31(85), pages 107-152.
    7. Emmanuel Saez & Gabriel Zucman, 2014. "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," NBER Working Papers 20625, National Bureau of Economic Research, Inc.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. Dünhaupt, Petra, 2014. "An empirical assessment of the contribution of financialization and corporate governance to the rise in income inequality," IPE Working Papers 41/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    10. Robin Greenwood & David Scharfstein, 2013. "The Growth of Finance," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 3-28, Spring.
    11. Anthony Atkinson & Thomas Piketty, 2010. "Top Incomes : A Global Perspective," Post-Print halshs-00754875, HAL.
    12. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    13. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    14. Jason Hecht, 2014. "Is net stock issuance relevant to capital formation? Comparing heterodox models of firm-level capital expenditures across the advanced and largest developing economies," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(5), pages 1171-1206.
    15. Martha Poon, 2009. "From New Deal institutions to capital markets: commercial consumer risk scores and the making of subprime mortgage finance," Working Papers halshs-00359712, HAL.
    16. Martha Poon, 2009. "From New Deal institutions to capital markets: commercial consumer risk scores and the making of subprime mortgage finance," CSI Working Papers Series 014, Centre de Sociologie de l'Innovation (CSI), Mines ParisTech.
    17. Fligstein, Neil & Goldstein, Adam, 2010. "The Anatomy of the Mortgage Securitization Crisis," Institute for Research on Labor and Employment, Working Paper Series qt9bh786v2, Institute of Industrial Relations, UC Berkeley.
    18. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    19. repec:hal:pseose:halshs-01207208 is not listed on IDEAS
    20. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," Post-Print halshs-01511070, HAL.
    21. Paul Oyer, 2008. "The Making of an Investment Banker: Stock Market Shocks, Career Choice, and Lifetime Income," Journal of Finance, American Finance Association, vol. 63(6), pages 2601-2628, December.
    22. Brian D. Bell & John Van Reenen, 2013. "Extreme Wage Inequality: Pay at the Very Top," American Economic Review, American Economic Association, vol. 103(3), pages 153-157, May.
    23. Thomas Philippon, 2014. "Efficiency and Benefit-Cost Analysis of the Financial System," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 107-120.
    24. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    25. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    26. Suzanna De Boef & Luke Keele, 2008. "Taking Time Seriously," American Journal of Political Science, John Wiley & Sons, vol. 52(1), pages 184-200, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:hal:spmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    2. Godechot, Olivier, 2015. "Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality," MaxPo Discussion Paper Series 15/3, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    3. Thibault Darcillon, 2016. "What Determines Top Income Shares? The Role of the Interactions between Financial Integration and Tax Policy [Le rôle des interactions entre l'intégration financière et la politique fiscale dans la," Post-Print halshs-01316927, HAL.
    4. Reurink, Arjan, 2016. "From elite lawbreaking to financial crime: The evolution of the concept of white-collar crime," MPIfG Discussion Paper 16/10, Max Planck Institute for the Study of Societies.
    5. repec:spo:wpmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    6. Koddenbrock, Kai, 2017. "What money does: An inquiry into the backbone of capitalist political economy," MPIfG Discussion Paper 17/9, Max Planck Institute for the Study of Societies.
    7. Braun, Benjamin, 2016. "Gross, greed, and ETFs: The case for a microfounded political economy of the investment chain," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 17(3), pages 6-13.

    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. Godechot, Olivier, 2015. "Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality," MaxPo Discussion Paper Series 15/3, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    2. repec:hal:spmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    3. repec:spo:wpmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    4. repec:hal:spmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    5. repec:spo:wpmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    6. Rémi Bazillier & Jérôme Hericourt, 2017. "The Circular Relationship Between Inequality, Leverage, And Financial Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 463-496, April.
    7. Glauco De Vita & Yun Luo, 2021. "Financialization, household debt and income inequality: Empirical evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1917-1937, April.
    8. repec:spo:wpmain:info:hdl:2441/4ff88coju39nk8b11b5ghfc1ff is not listed on IDEAS
    9. Bodea, Cristina & Houle, Christian & Kim, Hyunwoo, 2021. "Do financial crises increase income inequality?," World Development, Elsevier, vol. 147(C).
    10. Fourcade, Marion & Healy, Kieran, 2013. "Classification situations: Life-chances in the neoliberal era," Accounting, Organizations and Society, Elsevier, vol. 38(8), pages 559-572.
    11. Marion Fourcade & Kieran Healy, 2013. "Classification situations: Life-chances in the neoliberal era," Post-Print hal-03470535, HAL.
    12. Bazillier, Rémi & Héricourt, Jérôme & Ligonnière, Samuel, 2021. "Structure of income inequality and household leverage: Cross-country causal evidence," European Economic Review, Elsevier, vol. 132(C).
    13. repec:hal:spmain:info:hdl:2441/6cbt691h0h8o9q5rf0apko0pda is not listed on IDEAS
    14. repec:spo:wpmain:info:hdl:2441/6cbt691h0h8o9q5rf0apko0pda is not listed on IDEAS
    15. Olivier Godechot, 2019. "Conclusion: What finance manufactures," Post-Print hal-03393812, HAL.
    16. repec:hal:spmain:info:hdl:2441/4ff88coju39nk8b11b5ghfc1ff is not listed on IDEAS
    17. Neil Fligstein, 2021. "Innovation and the theory of fields," AMS Review, Springer;Academy of Marketing Science, vol. 11(3), pages 272-289, December.
    18. Dirk Bezemer & Anna Samarina, 2019. "Debt shift, financial development and income inequality," DNB Working Papers 646, Netherlands Central Bank, Research Department.
    19. Alaimo, Cristina & Kallinikos, Jannis, 2022. "Organizations decentered: data objects, technology and knowledge," LSE Research Online Documents on Economics 112470, London School of Economics and Political Science, LSE Library.
    20. Scott, Susan V., 2010. "Understanding the characteristics of techno-innovation in an era of self-regulated financial services," LSE Research Online Documents on Economics 37867, London School of Economics and Political Science, LSE Library.
    21. Bernardo Bátiz-Lazo, 2017. "Between Novelty and Fashion: Risk Management and the Adoption of Computers in Retail Banking," Palgrave Studies in the History of Finance, in: Korinna Schönhärl (ed.), Decision Taking, Confidence and Risk Management in Banks from Early Modernity to the 20th Century, pages 189-207, Palgrave Macmillan.
    22. Bill Maurer, 2012. "Finance 2.0," Chapters, in: James G. Carrier (ed.), A Handbook of Economic Anthropology, Second Edition, chapter 11, Edward Elgar Publishing.
    23. McFall, Liz, 2014. "Devising Consumption: cultural economies of insurance, credit and spending," OSF Preprints at2nv, Center for Open Science.
    24. Cochoy, Franck & Dubuisson-Quellier, Sophie, 2013. "The sociology of market work," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 15(1), pages 4-11.
    25. Martinez, Daniel E. & Pflueger, Dane & Palermo, Tommaso, 2022. "Accounting and the territorialization of markets: A field study of the Colorado cannabis market," Accounting, Organizations and Society, Elsevier, vol. 102(C).
    26. Atif Mian & Ludwig Straub & Amir Sufi, 2021. "Indebted Demand," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(4), pages 2243-2307.
    27. D'Orazio, Paola, 2019. "Income inequality, consumer debt, and prudential regulation: An agent-based approach to study the emergence of crises and financial instability," Economic Modelling, Elsevier, vol. 82(C), pages 308-331.
    28. Lipartito, Kenneth, 2011. "The narrative and the algorithm: Genres of credit reporting from the nineteenth century to today," MPRA Paper 28142, University Library of Munich, Germany.

    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:hal:spmain:hal-03459520. 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: Contact - Sciences Po Departement of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.