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Financialization Is Marketization!

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  • 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.

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  • 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
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    1. 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," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01316927, HAL.
    2. repec:hal:spmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    3. 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).
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    5. 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.
    6. 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.
    7. 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.

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