Financialization trajectories diverged across industries after 1997

Evidence

Using an integrated industry panel data set, this article examines the connection between the financialization of the U.S. economy and rising income inequality in the nonfinance sector from 1970 to 2008. We show that the reliance on earnings through financial channels has grown significantly since the 1980s in the nonfinance sector, particularly in manufacturing industries. We also show that there are nontrivial temporal and industrial variances with regard to the trajectory of financialization, which have been largely overlooked in the literature. While there was a collective movement of financialization among industries between 1970 and 1997, the trajectories diverged between 1998 and 2008, with the electrical equipment and products industry showing the strongest continued growth. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 165

Categorization

• QUESTION: The post-1998 divergence across industry trajectories is underexplored — worth chasing what drove electrical equipment’s continued financialization specifically.
• XREF: connects to: Industry-level financialization trajectories vary far more than macroeconomic accounts showed — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 67

Related

• Industry-level financialization trajectories vary far more than macroeconomic accounts showed (similarity 0.89)
• Financialization raises earnings inequality across most US industries (similarity 0.87)
• Most earnings inequality growth occurred within industries, not between them. (similarity 0.87)
• Financialization independently explains over half of labor’s falling income share since 1970. (similarity 0.84)
• Financialization caused most of the decline in labor’s income share since 1970 (similarity 0.84)
• Declining industries show rising earnings inequality (similarity 0.84)
• Financialization comprises both finance-sector dominance and nonfinance firms’ financial investing. (similarity 0.82)
• Financialization drives earnings inequality nearly as much as declining unionization (similarity 0.82)
• Prior research linked financialization to inequality mostly indirectly, not causally. (similarity 0.81)
• Financialization must be measured by profit generation, not employment or output (similarity 0.81)
• Nonfinance firms increasingly derived income from financial markets (similarity 0.81)
• Nonfinance-firm financialization has received little research attention. (similarity 0.81)
• The US economy became increasingly financialized in the post-1970s period. (similarity 0.80)
• Financialization caused roughly three-quarters of the labor share decline by 1997. (similarity 0.80)
• US inequality since 1970 grew mostly within rather than between industries (similarity 0.80)