Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/180949 
Year of Publication: 
2017
Series/Report no.: 
Working Paper No. 2017-06
Publisher: 
The University of Utah, Department of Economics, Salt Lake City, UT
Abstract: 
The ratio of financial to non-financial profits in the US economy has increased sharply since the 1970s, the period that is often called the financialisation of capitalism. By developing a two-sector theoretical model the ratio of financial to non-financial profits is shown to depend positively on the net interest margin and the non-interest income of banks, while it depends negatively on the general rate of profit, the non-interest expenses of banks, and the ratio of the capital stock to interest-earning assets. The model was estimated empirically for the post-war period and the results indicate that the ratio has varied mainly with respect to the net interest margin, although non-interest income has also played a significant role. The results confirm that in the course of financialisation the US financial sector has been able to extract rising profits through interest differentials and non-interest income, while the general rate of profit has remained broadly constant.
Subjects: 
rise in financial profits
financialisation
U.S. economy
JEL: 
E11
E44
G20
Document Type: 
Working Paper

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