Income Dynamics, Economic Rents and the Financialization of the ...

ABSTRACT
Income Dynamics, Economic Rents and the Financialization of the US Economy
This paper examines the income dynamics associated with the financialization of the US econo-
my. We advance a rent based explanation of the shift in US incomes into the finance sector. We
document both changes in income distributions and the institutional transformations that facili-
tated this process. Our analyses shows that long term shifts in institutional practices favor the
accumulation of income rents in the finance sector. Most of the increased banking industry in-
come went to profits rather than employee earnings. In contrast, the securities industry showed
increasing profit accumulation only after 2000, while employees in this industry made extraordi-
narily strong income gains beginning in 1980 and continuing through 2008. Where they occurred,
employee income gains were largely limited to managerial, professional and sales occupations.
White men benefited as well. Across the whole finance sector excess income rents since 1980
totals between 4.5 and 5.1 trillion dollars, half of which were realized since the year 2000. Be-
tween 60 and 70 percent of these rents were realized as excess profits, while the remainder as
increased employment and compensation for employees in this sector.
Electronic copy available at: http://ssrn.com/abstract=1539162
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