Journal Article

Income distribution and the size of the financial sector: a Sraffian analysis

Carlo Panico, Antonio Pinto and Martín Puchet Anyul

in Cambridge Journal of Economics

Published on behalf of Cambridge Political Economy Society

Volume 36, issue 6, pages 1455-1477
Published in print November 2012 | ISSN: 0309-166X
Published online March 2012 | e-ISSN: 1464-3545 | DOI: https://dx.doi.org/10.1093/cje/ber022
Income distribution and the size of the financial sector: a Sraffian analysis

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  • Financial Regulation
  • Economic Methodology
  • History of Economic Thought (1925 onwards)
  • Microeconomics
  • Analysis of Collective Decision-making
  • Corporate Regulation
  • General Aggregative Models
  • Money and Interest Rates
  • History of Economic Thought (to 1925)

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This paper explores the existence of links among the recent trends in income distribution, in the turnover of the financial industry and in financial regulation, moving from Sraffa’s analyses of money and banking. It presents a linear production model where a banking industry is introduced and argues that changes in the size of the financial industry can change the distributive shares even if the rates of profit and wage remain constant. An increase in the new loans to workers can increase the profit share and reduce the wage share through an increase in effective demand and the level of production. The analysis can support the contention that the process of financial deregulation, with the consequent explosion of the financial system and the rise of systemic risk, is at the basis of the increase in income inequality observed in recent years.

Keywords: Income distribution; Inequality; Banking industry; Financial system; Financial regulation; Lobbying activity; Sraffian approach; Linear production models; B12; B24; B26; B51; D31; D72; E11; E42; E44; G18; G28; G38

Journal Article.  13059 words.  Illustrated.

Subjects: Financial Regulation ; Economic Methodology ; History of Economic Thought (1925 onwards) ; Microeconomics ; Analysis of Collective Decision-making ; Corporate Regulation ; General Aggregative Models ; Money and Interest Rates ; History of Economic Thought (to 1925)

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