Did Financialization Reduce Economic Growth?

47 Pages Posted: 2 Mar 2015

See all articles by Donald Tomaskovic-Devey

Donald Tomaskovic-Devey

University of Massachusetts at Amherst

Ken-Hou Lin

University of Texas at Austin - Department of Sociology

Nathan Meyers

University of Massachusetts Amherst - Department of Sociology

Date Written: March 1, 2015

Abstract

We explore the economic growth consequences of increased financial investment by non-financial firms, finding consistent evidence that financialization in the non-finance sector reduced total value added. Employing an expanded conceptualization of value added which identifies internal (capital, labor) and external (creditors, government, charities) stakeholders with claims on the value generated in production and exchange, we also find that the declining value added produced by financialization was born most strikingly by labor and the state, while increasing value was channeled to corporate debt and equity holders. Corporate charities also had a net loss.

Keywords: growth, corporate finance, income distribution, economic sociology, financialization, financial economics

JEL Classification: E01, G31, O51

Suggested Citation

Tomaskovic-Devey, Donald and Lin, Ken-Hou and Meyers, Nathan, Did Financialization Reduce Economic Growth? (March 1, 2015). Available at SSRN: https://ssrn.com/abstract=2571897 or http://dx.doi.org/10.2139/ssrn.2571897

Donald Tomaskovic-Devey (Contact Author)

University of Massachusetts at Amherst ( email )

Amherst, 01003
United States
4135454070 (Phone)

Ken-Hou Lin

University of Texas at Austin - Department of Sociology ( email )

Austin, TX
United States

Nathan Meyers

University of Massachusetts Amherst - Department of Sociology ( email )

Amherst, MA 01003
United States

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