Financialization and U.S. Income Inequality, 1970–2008—Lin 2021

We examine the link between financialization and income inequality in U.S. nonfinance industries. Increasing reliance on financial earnings decoupled surplus from production, strengthening owners' and elite workers' negotiating power relative to other workers. The general workforce was excluded from revenue-generating and compensation-setting processes. Using industry-level time-series cross-section data, we find that increasing financial income dependence reduces labor's share of income, increases top executives' compensation, and increases earnings dispersion. Financialization has large effects on all three dimensions of income inequality, net of deunionization, globalization, technological change, and capital investment. Our counterfactual analysis suggests financialization could account for more than half of labor's share of income, 9.6% of officers' compensation growth, and 10.2% of earnings dispersion growth between 1970 and 2008.

Lin, K.-H., & Tomaskovic-Devey, D. (2013). Financialization and U.S. income inequality, 1970–2008. American Journal of Sociology, 118(5), 1284–1329. https://doi.org/10.1086/669499