The political economy and corporate control and labor rents

E.C. Perotti*, E.-L. Von Thadden

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

84 Citations (Web of Science)


In a democracy, a political majority can influence both the corporate governance structure and the return to human and financial capital. We argue that when financial wealth is sufficiently concentrated, there is political support for high labor rents and a strong governance role for banks or large investors. The model is consistent with the "great reversal" phenomenon in the first half of the twentieth century. We offer evidence that in several financially developed countries a financially weakened middle class became concerned about labor income risk associated with free markets and supported a more corporatist financial system.
Original languageEnglish
Pages (from-to)145-175
JournalJournal of Political Economy
Issue number1
Publication statusPublished - 1 Jan 2006

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