Recent research shows that financial activities expand the wage gap between affluent and middle-class workers in advanced industrial societies. Furthermore, a well-established literature indicates that differences in labor institutions may be responsible for cross-national variations of income inequality in developed countries. Surprisingly, there is no empirical research examining whether the positive association between financialization and income inequality is conditioned by differences in wage coordination. We contribute to this comparative income inequality literature by testing the claim that wage-setting institutions suppress the inequality-widening effects of finance in advanced industrial societies. To test this contention, we compile an unbalanced panel dataset of 20 developed economies during the years 1988 to 2009. According to our results, financial activities are a robust positive predictor of 90–50 inequality. More importantly, the interaction of financialization and wage coordination returns significant negative associations with the dependent variable. These results are found to be consistent across different estimation techniques and numerous regression parameters.
An emergent literature in sociology reveals a positive association between financialization and income inequality. Recent evidence also shows that various indicators of the new economy expand inequality in advanced industrial societies. Interestingly, less attention is paid to how financial activities moderate the connection between measures of the new economy and income inequality. We attempt to contribute to this literature by examining whether the distributional effect of the transition to the new economy is enhanced by financialization. To achieve this objective, we compile a panel data set of 18 advanced industrial societies for the years 1988 to 2008. According to the analysis, financial activities are one of the more consistent positive predictors of inequality in this study's sample of rich countries. More importantly, the interactions of financialization with service employment, female labor participation, and knowledge employment, respectively, return significant positive associations with income inequality. These results indicate that finance's tendency to expand the income of elite earners exacerbates the distributional impact of the transition to the new economy.