Income Dynamics, Economic Rents and the Financialization of the US Economy

29 Pages Posted: 25 Aug 2010 Last revised: 22 Oct 2011

See all articles by Donald Tomaskovic-Devey

Donald Tomaskovic-Devey

University of Massachusetts at Amherst

Ken-Hou Lin

University of Massachusetts Amherst

Date Written: June 19, 2011

Abstract

The 2008 collapse of the world financial system, while proximately linked to the housing bubble and risk laden mortgage backed securities, was a consequence of the financialization of the U.S. economy since the 1970s. This paper examines the institutional and income dynamics associated with financialization, advancing a sociological explanation of the large shifts of income into the finance sector. Complementary developments included banking deregulation, finance industry concentration, the increased size and scope of institutional investors, the shareholder value movement, and the dominance of the neoliberal policy model. As a result we estimate that since 1980 between 5.8 and 6.6 trillion dollars were transferred to the finance sector. We conclude that understanding inequality dynamics requires attention to market institutions and politics.

Keywords: financialization, income distribution, economic rents, institutional theory

JEL Classification: A14, D31, D43, E44, G20

Suggested Citation

Tomaskovic-Devey, Donald and Lin, Ken-Hou, Income Dynamics, Economic Rents and the Financialization of the US Economy (June 19, 2011). Available at SSRN: https://ssrn.com/abstract=1539162 or http://dx.doi.org/10.2139/ssrn.1539162

Donald Tomaskovic-Devey (Contact Author)

University of Massachusetts at Amherst ( email )

Amherst, 01003
United States
4135454070 (Phone)

Ken-Hou Lin

University of Massachusetts Amherst

Department of Operations and Information Managemen
Amherst, MA 01003
United States

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