Our paper contributes to the literature on financialization of modern economy and relies on firm staff data instead of the usual company accounts data. It uses for this aim several indicators that reveal the direct or indirect power of contemporary finance: importance and relative concentration within top paid wageearners, of the finance sector, of holdings in non-finance firms, of business consulting, and of financial managers in non-finance firms. Concentration of the finance sector among top wage earners seems to be the most striking phenomenon of the financialization process. The article then examines the impact of financialization on socio-spatial inequalities. To the increase in inequality, a phenomenon already known and demonstrated in our previous work, adds a phenomenon of territory division between the "global city" (Greater Paris and in particular its business district of La Défense) which has an international financial center and other parts of the territory. Thus, the process of spatial segregation becomes massive once we climb high enough in the wage distribution and we take into account the workplace. Albeit on a smaller scale, the concentration of working rich produced by financialization contributes to the residential ghettoization of the wealthiest wage earners.
Abstract:In this article, I 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. I test these impacts using cross-country panel regressions in OECD countries. I 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 I decompose this financial sector effect, I 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, I 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.
It is well documented that earnings inequalities have risen in many high-income countries. Less clear are the linkages between rising income inequality and workplace dynamics, how within- and between-workplace inequality varies across countries, and to what extent these inequalities are moderated by national labor market institutions. In order to describe changes in the initial between- and within-firm market income distribution we analyze administrative records for 2,000,000,000+ job years nested within 50,000,000+ workplace years for 14 high-income countries in North America, Scandinavia, Continental and Eastern Europe, the Middle East, and East Asia. We find that countries vary a great deal in their levels and trends in earnings inequality but that the between-workplace share of wage inequality is growing in almost all countries examined and is in no country declining. We also find that earnings inequalities and the share of between-workplace inequalities are lower and grew less strongly in countries with stronger institutional employment protections and rose faster when these labor market protections weakened. Our findings suggest that firm-level restructuring and increasing wage inequalities between workplaces are more central contributors to rising income inequality than previously recognized.
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