RETRACTED: How does financialization affect functional income distribution? A theoretical clarification and empirical assessment.

This article investigates how financialization has influenced the decline in the wage share—the proportion of national income paid as wages—in 14 OECD countries from 1989 to 2011. It identifies four theoretical mechanisms linking financialization to wage share changes: (1) enhanced exit options for capital increasing firms' bargaining power; (2) rising financial overhead costs for non-financial corporations leading to higher mark-ups; (3) intensified competition on capital markets pressuring firms; and (4) increased household debt raising workers' financial vulnerability and weakening class consciousness. Using panel regression analysis with comprehensive financialization measures, the study finds robust negative effects of international financial openness and household debt on the wage share, while evidence for financial payments by firms and capital market competition is weaker or inconclusive. The findings highlight the significant role of household debt in shaping income distribution, suggesting a need for further theoretical and empirical research on its impact on labor bargaining power.