Financialization Is Securitization! a Study on the Respective Impact of Various Dimensions of Financialization on the Increase in Global Inequality.

We study the impact of financialization on the rise in inequality in 18 OECD countries from 1971 to 2011 and we measure the respective roles of various forms of financialization : the growth of the financial sector, the growth of one of its subcomponent, the financial markets, the financialization of non-financial firms and the financialization of households. We test these impacts thanks to cross country panel regressions in OECD countries. As dependent measures we use both Solt's (2009) Gini index, World Top Income Database, and OECD inter-deciles inequality measures. We show first that the share of finance sector within the GDP is a substantial driver of world inequality, explaining from 20% to 40% of its increase from 1980 to 2007. When we decompose this financial sector effect, we find that this evolution was mainly driven by the increase in the volume of transactions in national stock-exchanges and by the volume of shares held as assets in banks' balance sheet. On the contrary, financialization of non financial firms and of households does not play a substantial role. Based on this inequality test, we therefore interpret financialization as being mainly a movement of securitization, redefined as the growing amount of social energy devoted to the trade of financial instruments on financial markets.