Financialisation and the Productive Structure

This thesis explores theoretically and empirically the relationship between financialisation and structural change. Particularly, it analyses to what extent does financialisation shape the ability of developing countries to move to higher value-added activities. Financialisation has been linked to modest economic growth and investment since the 1980s. Nevertheless, most research focuses on the aggregate levels without zooming into countries’ productive structures. Also, those who pointed to premature deindustrialisation paid little attention to how financialisation shaped these processes. This thesis fills these gaps by combining financialisation and Structuralist literature, with a particular focus on Latin America. It provides a theoretical framework to enrich the understanding of financialisation and structural transformation. Three empirical chapters further investigate the financialisation-productive structure nexus across time using panel data techniques and digging into regional patterns and centre-periphery dynamics.
The first analyses the relation between financialisation (measured by different indicators) and the economic complexity index, displaying that private credit has a detrimental effect on economic complexity across the board but with an inverted U-shape pattern in Latin America. Besides, in Latin America, the Middle East and North Africa, the stock of foreign financial assets and liabilities negatively impacts complexity.
The second delves deeper into one of the components of financialisation, the expansion of private credit, and the shift in importance from firm to household credit. It investigates the differential impacts of both types of credit on manufacturing activities. Results confirm that whilst firm credit positively affects the manufacturing sector in developed countries and Latin America, household credit has a negative effect across the board.
The third discusses premature deindustrialisation, if and to what extent it is associated with financialisation by analysing the evolution of employment and value-added shares. It shows that deindustrialisation trends are not widespread and that it is accompanied by premature financialisation only in Latin America.