Finance and Labor: Perspectives on Risk, Inequality, and Democracy

Abstract

This paper considers the association between financial development and labor-market outcomes such as risk and inequality. The relationship is not straightforward, however. It is mediated by politics at the national and corporate levels. Politics spurs financial development, which sets in motion countervailing efforts to restrain the effect of finance on inequality and risk. The empirical analysis relies on historical, comparative, and contemporary evidence. Emphasis is given to recent events in the United States: the political origins of contemporary financial development and attempts by organized labor and its allies to re-regulate finance and reshape corporate governance.

Keywords: labor, shareholders, financial regulation, pensions, risk, corporate governance, unions, inequality

JEL Classification: D23, D63, G23, G34, J32, J41, J51, K22, N22