This chapter investigates the different effect of financialization on the allocation of risk and inequality in the advanced capitalist economies by stressing the role of politics. First, we explore the mechanisms underlying how different dimensions of financialization–the growth of the financial sector, a change in corporate governance rules and practices in nonfinancial companies and a diffusion of new financial values for households–should affect the allocation of risk and inequality. Additionally, financialization has also affected labor market institutions and tax systems which traditionally have a reducing-effect on inequality and risk. Second, politics plays a central role in shaping the relationship between finance, risk and income. From this point of view, financial deregulation reforms can be seen as political choices as a response to particular sociopolitical expectations. Furthermore, the rise of income inequality and income risk has then affected social demands for redistribution.
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