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Financialization in Swedish Capitalism: Debt, inequality and crisis in Sweden, 1900-2013
Stockholm University, Faculty of Social Sciences, Department of Economic History.
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This dissertation adresses financialization – the increasing role of financial activities in the overall economy – in Sweden in 1900-2013. The focus is on the long run relationships between private debt, asset markets, inequality and financial crisis during this period. In line with established scholarship, the present study finds that changes in bank debt had a positive impact on the probability of financial crisis in Sweden. Functional income distribution between profits and wages was an underlying factor influencing the formation of bank debt levels through its impact on collateral in stock markets. Expenses related to the Swedish welfare state – the size of the public sector, government investment and housing construction – had a long run relationship with the wage share. The welfare state has been an effective counter-measure not just against a high profit share, but also against financialization. Moreover, the dissertation shows that the recent era of financialization in Swedish capitalism is not unique in kind. Rather, recent financialization is very similar to the macroeconomic situation during the early decades of the 20th Century. These findings are consistent with much of heterodox economic theory, in particular the Neo-Marxist approach. 

Place, publisher, year, edition, pages
Stockholm: Department of Economic History, Stockholm University , 2017.
Series
Stockholm studies in economic history, ISSN 0346-8305 ; 67
Keywords [en]
debt, inequality, financialization, financial crisis
National Category
Economic History
Research subject
Economic History
Identifiers
URN: urn:nbn:se:su:diva-148711ISBN: 978-91-7797-063-7 (print)ISBN: 978-91-7797-064-4 (electronic)OAI: oai:DiVA.org:su-148711DiVA, id: diva2:1155365
Public defence
2017-12-22, hörsal 2 hus A, Universitetsvägen 10 A, 114 18 Stockholm, 13:00 (Swedish)
Opponent
Supervisors
Note

At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 3: Manuscript. Paper 4: Manuscript.

Available from: 2017-11-29 Created: 2017-11-07 Last updated: 2017-11-29Bibliographically approved
List of papers
1. Private debt in Sweden in 1900–2013 and the risk of financial crisis
Open this publication in new window or tab >>Private debt in Sweden in 1900–2013 and the risk of financial crisis
2015 (English)In: Scandinavian Economic History Review, ISSN 0358-5522, E-ISSN 1750-2837, Vol. 63, no 3, p. 302-323Article in journal (Refereed) Published
Abstract [en]

This study presents new time series data for private debt in Sweden in 1900–2013, including credit from banks, mortgage institutes and credit companies. The reconstruction of the data is a scientific task by itself, and is complicated by changed definitions, breaks in the series, and the need for occasional interpolation and cross-reference of sources. The obtained data reveal both qualitative and quantitative changes in the structure of private debt in Sweden during the period. One finding is a pattern where the era starting with the deregulation of the credit market in 1985 resembles the era preceding World War Two. Both periods experienced a high level of private debt-to-GDP ratio as well as severe financial crises. In a first application of the data, the hypothesis of rising private debt in the years before a financial crisis is explored through logit regression. The findings are in line with international research, and suggest that higher lending, especially from banks, might aggravate the risk of financial crisis.

Keywords
private deb, bank credit, mortgage, financial crisis
National Category
Economic History
Research subject
Economic History
Identifiers
urn:nbn:se:su:diva-125225 (URN)10.1080/03585522.2015.1084946 (DOI)
Available from: 2016-01-08 Created: 2016-01-08 Last updated: 2017-11-07Bibliographically approved
2. Inequality and bank debt in Sweden in 1919–2012
Open this publication in new window or tab >>Inequality and bank debt in Sweden in 1919–2012
2018 (English)In: European Review of Economic History, ISSN 1361-4916, E-ISSN 1474-0044, Vol. 22, no 2, p. 161-184Article in journal (Refereed) Published
Abstract [en]

This study demonstrates a long-run relationship between inequality and the bank debt to GDP ratio in Sweden in 1919–2012. The findings suggest that much of the impact of the top income share on the debt ratio comes from changes in the profit share. Earlier research claims that the rich, via the banks, have lent their savings to the poor as a substitute for wage gains, but this description seems ill-suited for Sweden. An alternative explanation is that banks consider profits to be an indicator of the safety of a loan. This is more in line with the study’s findings.

Keywords
Debt, inequality
National Category
Economic History
Research subject
Economic History
Identifiers
urn:nbn:se:su:diva-148713 (URN)10.1093/ereh/hex019 (DOI)
Available from: 2017-11-06 Created: 2017-11-06 Last updated: 2018-07-27Bibliographically approved
3. Inequality, asset markets and bank debt in Sweden, 1900-2013
Open this publication in new window or tab >>Inequality, asset markets and bank debt in Sweden, 1900-2013
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This investigation concerns the nexus between inequality, asset markets, and private debt, in the case of Sweden in 1900-2013. The evidence of the study suggests that financial wealth in stocks relative to GDP is an intermediary variable between the profit share and bank debt to GDP ratio. Though the study finds that there is a positive long run relationship between the profit share and the bank debt ratio in the case at hand, the inclusion of the stock market wealth ratio changes the sign of the profit share coefficient. Even so, there is also a positive long run relationship between the profit share and stock market wealth relative to GDP. This means that changes in the profit share may still have a positive impact on credit formation, though indirectly via the stock market. The study finds some evidence that collateral in the form of housing wealth is another determinant of the debt level.

Keywords
Inequality, asset markets, debt, financialization
National Category
Economic History
Research subject
Economic History
Identifiers
urn:nbn:se:su:diva-148738 (URN)
Note

Part of dissertation "Financialization in Swedish Capitalism: Debt, inequality and crisis in Sweden, 1900-2013", ISBN PDF: 978-91-7797-064-4.

Available from: 2017-11-07 Created: 2017-11-07 Last updated: 2017-11-08Bibliographically approved
4. The wage share and the welfare state in Sweden, 1900-2013
Open this publication in new window or tab >>The wage share and the welfare state in Sweden, 1900-2013
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This study explores the long run relationship between the wage share in the private sector and the extent of the Swedish welfare state in 1900-2013. It uses a novel approach where government intervention in the economy is broken down into three different aspects: Government consumption, government investment and residential construction. The construction of dwellings may seem questionable at first glance, since it to a large degree has been carried out by private interests. The fact that housing policy has been an important part of welfare policy through several channels motivates inclusion of the variable however. Government investment, mainly in infrastructure, and house construction as factors influencing the functional income distribution has been neglected in previous research. Through the use of single-equation cointegration technique, the study finds a positive and robust long run relationship between the private wage share and all three welfare variables.

Keywords
Wage share, functional income distribution, welfare state
National Category
Economic History
Research subject
Economic History
Identifiers
urn:nbn:se:su:diva-148739 (URN)
Note

Part of dissertation "Financialization in Swedish Capitalism: Debt, inequality and crisis in Sweden, 1900-2013", ISBN PDF: 978-91-7797-064-4.

Available from: 2017-11-07 Created: 2017-11-07 Last updated: 2017-11-08Bibliographically approved

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