Finance, Discipline and the Labour Share in the Long-Run: France (1911-2010) and Sweden (1891-2000)

There is an ongoing debate within political economy on how finance affects capital-labour relations. Industrial relation scholars have demonstrated that financialization empowers capital and induces the liberalization of industrial relations. Additionally, meso and macro level studies show that finance reduced the labour share during neoliberalism. However, the literature is relatively limited and does not extend to the pre-WWII period. Considering finance as historically integral to capitalism, this paper estimates the impact of finance on the labour shares of France (1911-2010) and Sweden (1891-2000). The results show that mortgage debt decreases the labour shares of both countries, thus, the financialization of households induces industrial discipline historically. However, the negative effect is substantially smaller in Sweden where housing finance is state-led and bargaining coordination is centralized over the last century.

Automated summary

There is a debate in political economy on how finance affects capital-labor relations. This study examines the impact of finance on labor shares in France and Sweden, finding that mortgage debt decreases labor shares but with a smaller effect in Sweden due to state-led housing finance and centralized bargaining coordination over the century.