Rentier Incomes and Financial Crises: An Empirical Examination of Trends and Cycles in Some OECD Countries

Abstract

We present new estimates of the rentier share of national income for OECD countries for the years between 1960 and 2000. For most countries, the rentier share of income significantly increased during the last several decades, starting in the early 1980's and coinciding with the shift to neo-liberal monetary and financial policies initiated by Margaret Thatcher and Paul Volcker. There is no evidence of a negative correlation between rentier shares and non-financial corporate shares of income. However, rentier shares do decline in those semi-industrialized countries that experienced financial crises. These findings are consistent with the view that financial liberalization has been associated with the increased power of an international rentier class, whose interests are aligned with those of non-financial corporations in the richer countries, but whose interests conflict with rentiers in developing countries that experience financial crises.3

Finance-dominated capitalism and re-distribution of income: a Kaleckian perspective

“…Since nominal interest payments also compensate for capital losses due to inflation, Epstein and Jayadev (2005) have extended the analysis for 15 OECD countries , correcting the share of rentiers' income in GDP for inflation. Applying this method, they mainly confirm the earlier results by Epstein and Power (2003). These studies, however, only partially cover the distributive effects of financialization because they do not include dividend payments of non-financial corporations to private households in their definition of rentiers' income.…”

“…16 Therefore, rising interest payments have had to be paid for by a reduction in the labor income share and it has thus been mainly the rentiers class which has benefited from redistribution at the expense of labor. In a more general study on 29 OECD countries focusing on the development of the share of rentiers' income in GDP, Epstein and Power (2003) confirm the results by Dumenil and Levy (2005). They show that the share of rentiers' income in GDP increased at the expense of the wage share in most countries during the 1980s, remaining on the high level through the 1990s.…”

Finance and Centre-Periphery Dynamics: A Model

“…The result, however, has been far beyond expectations: interest rates raised more and for longer than expected, especially in less developed countries [7]. This resulted in strangulation of small and medium-sized enterprises, which have no easy access to direct financing, and in a compression of wage levels.…”

Trends in the Rentier Income Share in OECD Countries, 1960-2000

“…For example, to what extent do changes in inflation, interest rates, and macroeconomic policy and financial liberalization affect rentier income? (See for example, the initial work by Epstein and Power, 2003). What is the impact of increases in rentier shares on investment and economic growth (see for example the work by Stockhammer, 2000;Power, 2003).…”