A Keynesian Approach
New Directions in Modern Economics series
Chapter 6: Financialization and the Slowdown of Capital Accumulation
6.1 INTRODUCTION We established in the previous chapter our hypothesis that ﬁnancialization will lead to a change in management priorities that translates into less investment. In this chapter we will carry out empirical tests of this hypothesis. Before we can do so, we review the literature on investment functions and their empirical estimation. This is necessary to establish variables that need to be controlled for in our estimations. Throughout this chapter we will use the terms ‘investment’ and ‘accumulation’ almost synonymously: accumulation is investment normalized by the capital stock. We test the hypothesis by means of aggregate annual investment data for the business sector for Germany, France, the UK and the USA. We ﬁnd our argument that ﬁnancialization is negatively related to accumulation clearly conﬁrmed for France and the USA and, at less satisfactory levels of statistical signiﬁcance, for the UK. Only in Germany do the estimations indicate the opposite sign from what we predicted. This may however be reconciled with our argument by the fact that shareholder value orientation is much less advanced in Germany than in other countries. As to the economic signiﬁcance of our results, calculation conﬁrms that ﬁnancialization may in fact have been a major force in the slowdown in accumulation. The chapter is structured as follows. The ﬁrst section contains the literature review on investment. We will discuss the rationales behind the most frequently found variables: output, proﬁts and the cost of capital. The debate has long focused on the...
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