Inequality pp 43-87 | Cite as

Financialisation, Financial Crisis and Inequality

  • Malcolm SawyerEmail author
Part of the International Papers in Political Economy book series (IPPE)


This chapter outlines how the pace and structure of financialisation have differed over time and across countries, and also how income distribution (inequality of personal income, distribution between wages and profits) has proceeded with different time profiles and structures. This chapter outlines the nature and features of financialisation in the present era, and provides a summary of the main trends in income distribution and inequality over the past three decades. The links between the financial sector and inequality of income and earnings are explored, and specifically the extent of inequality within the financial sector and the degree to which inequality in the financial sector contributes to overall inequality. The evidence on the processes of financialisation and the distribution of income is reviewed. The ways in which financial deepening can impact on inequality and poverty are explored. The links between inequality and financial crisis and household debt are reviewed.


Financialisation Financial crisis Inequality Income distribution 

JEL Classification

G01 G20 D3 


  1. Alvaredo, F., Atkinson, A. B., Piketty, T., & Saez, E. (2013). The Top 1 Percent in International and Historical Perspective. Journal of Economic Perspectives, 27(3), 3–20.CrossRefGoogle Scholar
  2. Alvarez, I. (2015). Financialization, Non-financial Corporations and Income Inequality: The Case of France. Socio-Economic Review, 13(3), 449–475. Scholar
  3. Arestis, P., Charles, A., & Fontana, G. (2013). Financialization, the Great Recession, and the Stratification of the US Labor Market. Feminist Economics, 19(3), 152–180. Scholar
  4. Arestis, P., Charles, A., & Fontana, G. (2014). Identity Economics Meets Financialisation: Gender, Race and Occupational Stratification in the US Labour Market. Cambridge Journal of Economics, 38(6), 1471–1491.CrossRefGoogle Scholar
  5. Ashman, S., & Fine, B. (2013). Neo-liberalism, Varieties of Capitalism, and the Shifting Contours of Africa’s Financial System. Transformation: Critical Perspectives on Southern Africa, 81(82), 144–178.CrossRefGoogle Scholar
  6. Atkinson, A. B., & Morelli, S. (2011). Economic Crises and Inequality (Human Development Research Paper, 2011/06).Google Scholar
  7. Bakija, J., Cole, A., & Heim, B. T. (2012). Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from US Tax Returns Data. Williams College, US Department of Treasury and Indiana University.Google Scholar
  8. Barba, A., & Pivetti, M. (2009). Rising Household Debt: Its Causes and Macroeconomic Implications—A Long Period Analysis. Cambridge Journal of Economics, 33(1), 113–137.CrossRefGoogle Scholar
  9. Bazillier, R., & Hericourt, J. (2017). The Circular Relationship Between Inequality, Leverage, and Financial Crises. Journal of Economic Surveys, 31(2), 463–496. Scholar
  10. Beck, T., Levine, R., & Demirguc-Kunt, A. (2007). Finance, Inequality and the Poor. Journal of Economic Growth, 12(1), 27–49.CrossRefGoogle Scholar
  11. Bell, B., & Van Reenen, J. (2014). Bankers and Their Bonuses. Economic Journal, 124, F1–F21.CrossRefGoogle Scholar
  12. Bellettini, G., & Delbono, F. (2013). Persistence of High Income Inequality and Banking Crises: 1980–2010 (CESifo Working Paper, No. 4293).Google Scholar
  13. Bivens, J., & Mishel, L. (2013). The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes. Journal of Economic Perspectives, 27(3), 57–78.CrossRefGoogle Scholar
  14. Bordo, M. D., & Meissner, C. M. (2012). Does Inequality Lead to a Financial Crisis? Journal of International Money and Finance, 31, 2147–2161.CrossRefGoogle Scholar
  15. Bortz, P. G., & Kaltenbrunner, A. (2018). The International Dimension of Financialization in Developing and Emerging Economies. Development and Change, 49(2), 375–393.
  16. Brown, A., Spencer, D., & Veronese Passarella, M. (2017). The Extent and Variegation of Financialisation in Europe: A Preliminary Analysis. Revista de Economia Mundial [Journal of World Economy], 46, 49–69.Google Scholar
  17. Cardaci, A., & Saraceno, F. (2015). Inequality, Financialisation and Economic Crises: An Agent Based Macro Model (Working Paper 2015-21). Dipartimento di Economia, Universita degli di Milano.Google Scholar
  18. Christophers, B. (2011). Making Finance Productive. Economy and Society, 40(1), 112–140.CrossRefGoogle Scholar
  19. Darcillon, T. (2015). How Does Finance Affect Labor Market Institutions? An Empirical Analysis in 16 OECD Countries. Socio-Economic Review, 13(3), 477–504. Scholar
  20. Das, M., & Mohapatra, S. (2003). Income Inequality: The Aftermath of Stock Market Liberalization in Emerging Markets. Journal of Empirical Finance, 10(1), 217–248.CrossRefGoogle Scholar
  21. Davis, G., & Kim, S. (2015). Financialization of the Economy. Annual Review of Sociology, 41, 203–221.CrossRefGoogle Scholar
  22. Demirguc-Kunt, A., & Levine, R. (2009). Finance and Inequality: Theory and Evidence (NBER Working Paper No. 15275). Cambridge, MA. Available online
  23. Denk, O. (2015). Financial Sector Pay and Labour Income Inequality: Evidence from Europe (OECD Economics Department Working Papers, No. 1225). Paris: OECD.Google Scholar
  24. Denk, O., & Cournède, B. (2015). Finance and Income Inequality in OECD Countries (OECD Economics Department Working Papers, No. 1224). Paris: OECD.
  25. Detzer, D., Dodig, N., Evans, T., Hein, E., & Herr, H. (2013). The German Financial System (FESSUD Studies in Financial Systems No. 3).Google Scholar
  26. Dünhaupt, P. (2017). Determinants of Labour’s Income Share in the Era of Financialisation. Cambridge Journal of Economics, 41(1), 283–306.CrossRefGoogle Scholar
  27. Eichacker, N. (2017). Financial Underpinnings of Europe’s Financial Crisis: Liberalization Integration and Asymmetric State Power. Cheltenham: Edward Elgar.CrossRefGoogle Scholar
  28. Epstein, G. (2005). Introduction: Financialization and the World Economy. In G. Epstein (Ed.), Financialization and the World Economy. Cheltenham and Northampton: Edward Elgar.Google Scholar
  29. European Central Bank (ECB). (2017, May). Financial Integration in Europe.Google Scholar
  30. Evans, T. (2014). The Impact of Financial Liberalization on Income Inequality [Special Issue on The Challenge of Inequality]. International Journal of Labour Research, 6(1), 129–142.Google Scholar
  31. Fasianos, A., Guevara, D., & Pierros, C. (2018, January). Have We Been Here Before? Phases of Financialization Within the Twentieth Century in the US. Review of Keynesian Economics, 6(1), 34–61.
  32. Ferreiro, J., & Gómez, C. (2016). Financialisation and Financial Balance Sheets of Economic Sectors in the Eurozone. In P. Arestis & M. Sawyer (Eds.), Financial Liberalisation: Past, Present and Future. Annual Edition of International Papers in Political Economy. Houndmills and Basingstoke: Palgrave Macmillan.Google Scholar
  33. Flaherty, E. (2015). Top Incomes Under Finance-Driven Capitalism, 1990–2010: Power Resources and Regulatory Orders. Socio-Economic Review, 13(3), 417–447. Scholar
  34. Goda, T., & Lysandrou, P. (2014). The Contribution of Wealth Concentration to the Subprime Crisis: A Quantitative Estimation. Cambridge Journal of Economics, 38, 301–327. Scholar
  35. Godechot, O. (2012). Is Finance Responsible for the Rise in Wage Inequality in France. Socio-Economic Review, 109, 447–470. Scholar
  36. Greenwood, J., & Jovanovic, B. (1990). Financial Development, Growth, and the Distribution of Income. Journal of Political Economy, 98(5), 1076–1107.CrossRefGoogle Scholar
  37. Hein, E. (2015). Finance-Dominated Capitalism and Redistribution of Income: A Kaleckian Perspective. Cambridge Journal of Economics, 39(3), 907–934.CrossRefGoogle Scholar
  38. Hein, E., Dünhaupt, P., Alfageme, A., & Kulesza, M. (2017). Financialisation and Distribution Before and After the Crisis: Patterns for Six OECD Countries. In P. Arestis & M. Sawyer (Eds.), Economic Policies Since the Global Financial Crisis (pp. 127–172). Houndsmill: Palgrave Macmillan.CrossRefGoogle Scholar
  39. Iacoviello, M. (2008). Household Debt and Income Inequality, 1963–2003. Journal of Money Credit and Banking, 40(5), 929–965.CrossRefGoogle Scholar
  40. International Institute for Labour Studies (IILS). (2008). World of Work Report 2008: Income Inequalities in the Age of Financial Globalization. Geneva: International Labour Organization.Google Scholar
  41. Jauch, S., & Watzka, S. (2016). Financial Development and Income Inequality: A Panel Data Analysis. Empirical Economics, 51(1), 291–314.CrossRefGoogle Scholar
  42. Jessop, B. (2013). The North Atlantic Financial Crisis and Varieties of Capitalism: A Minsky and/or Marx Moment? And Perhaps Max Weber Too? In S. Fadda & P. Tridico (Eds.), Financial Crisis, Labour Markets and Institutions (pp. 40–59). London: Routledge.Google Scholar
  43. Kaltenbrunner, A., & Painceira, J. P. (2018). Subordinated Financial Integration and Financialisation in Emerging Capitalist Economies: The Brazilian Experience. New Political Economy, 23(3), 290–313.
  44. Kaplan, S., & Rauh, J. (2010). Wall Street and Main Street: What Contributes to the Rise in the Highest Income? Review of Financial Studies, 23(3), 1004–1050.CrossRefGoogle Scholar
  45. Kay, J. (2015). Other People’s Money: Masters of the Universe or Servants of the People? London: Profile Books.Google Scholar
  46. Kim, Y. K. (2013). Household Debt, Financialisation, and Macroeconomic Performance in the United States, 1951–2009. Journal of Post Keynesian Economics, 35, 675–694.CrossRefGoogle Scholar
  47. Kim, Y. K. (2016). Macroeconomic Effects of Household Debt: An Empirical Analysis. Review of Keynesian Economics, 4, 127–150.CrossRefGoogle Scholar
  48. Kim, D. H., & Lin, S. C. (2011). Nonlinearity in the Financial Development-Income Inequality Nexus. Journal of Comparative Economics, 39(3), 310–325.CrossRefGoogle Scholar
  49. Klein, M. (2015). Inequality and Household Debt: A Panel Cointegration Analysis. Empirica, 42, 391–412.CrossRefGoogle Scholar
  50. Laeven, L., & Valencia, F. (2012). Systemic Banking Crises Database: An Update (IMF Working Papers, WP/12/163).Google Scholar
  51. Laeven, L., & Valencia, F. (2013). Systemic Banking Crises Database. IMF Economic Review, 61, 225–270. Scholar
  52. Lin, K.-H., & Tomaskovic-Devey, D. (2013). Financialization and U.S. Income Inequality, 1970–2008. American Journal of Sociology, 118(5), 1284–1329.CrossRefGoogle Scholar
  53. Lindley, J., & McIntosh, S. (2017). Finance Sector Wage Growth and the Role of Human Capital. Oxford Bulletin of Economics and Statistics, 79(4), 570–691.CrossRefGoogle Scholar
  54. Lindo, D. (2018). Why Derivatives Need Models: The Political Economy of Derivative Valuation Models. Cambridge Journal of Economics, 42(4), 987–1008.
  55. Malinen, T. (2016). Does Income Inequality Contribute to Credit Cycles. Journal of Economic Inequality, 14, 309–325.
  56. Michell, J. (2015). Income Distribution and the Financial and Economic Crisis. In E. Hein, D. Detzer, & N. Dodig (Eds.), The Demise of Finance-Dominated Capitalism Explaining the Financial and Economic Crises (pp. 240–264). Cheltenham: Edward Elgar.Google Scholar
  57. Morelli, S., & Atkinson, A. B. (2015). Inequality and Crises Revisited. Economia Politica, 32(1), 31–51.CrossRefGoogle Scholar
  58. Nau, M. (2013). Economic Elites, Investments, and Income Inequality. Social Forces, 92, 437–461.CrossRefGoogle Scholar
  59. Nikoloski, Z. (2013). Financial Sector Development and Inequality: Is There a Financial Kuznets Curve? Journal of International Development, 25(5), 897–911.CrossRefGoogle Scholar
  60. Panico, C., & Pinto, A. (2018). Income Inequality and the Financial Industry. Metroeconomica, 69(1), 39–59.CrossRefGoogle Scholar
  61. Panico, C., Pinto, A., & Puchet Anyul, M. (2012). Income Distribution and the Size of the Financial Sector: A Sraffian Analysis. Cambridge Journal of Economics, 36(6), 1455–1477.CrossRefGoogle Scholar
  62. Philippon, T., & Reshef, A. (2012). Wages and Human Capital in the U.S. Finance Industry: 1909–2006. The Quarterly Journal of Economics, 127(4), 1551–1609.
  63. Philippon, T., & Reshef, A. (2013). An International Look at the Growth of Modern Finance. Journal of Economic Perspectives, 27(2), 73–96.CrossRefGoogle Scholar
  64. Rajan, R. (2010). Fault Lines. Princeton, NJ: Princeton University Press.Google Scholar
  65. Roberts, A., & Kwon, R. (2017). Finance, Inequality and the Varieties of Capitalism in Post-industrial Democracies. Socio-Economic Review, 15(3), 511–538. Scholar
  66. Sawyer, M. (2014). Bank-Based Versus Market-Based Financial Systems: A Critique of the Dichotomy (FESSUD Working Papers, No. 19). Available at
  67. Spreafico, M. (2018). Is the Share of Income of the Top One Percent Due to the Marginal Product of Labour or Managerial Power? In P. Arestis (Ed.), Alternative Approaches in Macroeconomics: Essays in Honour of John McCombie (pp. 155–181). Houndsmill: Palgrave Macmillan.CrossRefGoogle Scholar
  68. Stockhammer, E. (2015a). Rising Inequality as a Root Cause of the Present Crisis. Cambridge Journal of Economics, 39, 935–958.Google Scholar
  69. Stockhammer, E. (2015b). Determinants of the Wage Share: A Panel Analysis of Advanced and Developing Economies. British Journal of Industrial Relations. Advance access
  70. Sum, A., Tobar, P., McLaughlin, J., & Palma, S. (2008). The Great Divergence: Real-Wage Growth of all Workers Versus Finance Workers. Challenge, 51(3), 57–79.CrossRefGoogle Scholar
  71. Tomaskovic-Devey, D., & Lin, K.-H. (2011). Income Dynamics, Economic Rents, and the Financialization of the U.S. Economy. American Sociological Review, 76, 538–559.CrossRefGoogle Scholar
  72. Tridico, P. (2018, forthcoming). The Determinants of Income Inequality in OECD countries. Cambridge Journal of Economics, 42(4), 1009–1042.
  73. Tridico, P., & Pariboni, R. (2018). Theoretical and Empirical Analyses of the Rise of Income Inequality in Rich Countries. In P. Arestis & M. Sawyer (Eds.), Inequality: Trends, Causes, Consequences, Relevant Policies. Basingstoke: Palgrave Macmillan.Google Scholar
  74. UNCTAD. (2017). Trade and Development Report: Beyond Austerity Towards a Global New Deal. Geneva: UNCTAD.Google Scholar
  75. UNDP. (2017). Income Inequality Trends in Sub-Saharan Africa: Divergence, Determinants, Consequences. New York: UNDP.Google Scholar
  76. Van der Zwan, N. (2014). State of the Art: Making Sense of Financialization. Socio-Economic Review, 12, 99–129.Google Scholar
  77. Van Treeck, T. (2014). Did Inequality Cause the U.S. Financial Crisis? Journal of Economic Surveys, 28(3), 421–448.CrossRefGoogle Scholar
  78. Van Treeck, T., & Sturn, S. (2012). Income Inequality as a Cause of the Great Recession? A Survey of Current Debates (ILO Conditions of Work and Employment Series, No. 39).Google Scholar
  79. Vercelli, A. (2014). Financialization in a Long-Run Perspective: An Evolutionary Approach. International Journal of Political Economy, 42(4), 19–46.CrossRefGoogle Scholar
  80. Westcott, M., & Murray, J. (2017). Financialisation and Inequality in Australia. The Economic and Labour Relations Review, 28(4), 519–537.CrossRefGoogle Scholar
  81. Zallewski, D., & Whalen, C. J. (2010). Financialization and Income Inequality: A Post Keynesian Institutionalist Analysis. Journal of Economic Issues, 44(3), 757–777.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.Leeds University Business SchoolUniversity of LeedsLeedsUK

Personalised recommendations