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Inequality, financialisation and economic decline

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  • Pasquale Tridico
  • Riccardo Pariboni

Abstract

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.

Suggested Citation

  • Pasquale Tridico & Riccardo Pariboni, 2016. "Inequality, financialisation and economic decline," Departmental Working Papers of Economics - University 'Roma Tre' 0211, Department of Economics - University Roma Tre.
    • Handle: RePEc:rtr:wpaper:0211
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    More about this item

    Keywords

    Labour productivity; Inequality; Financialisation.;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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