This work focuses on the determinants of the declining labor share in

Spain between 1995 and 2021. We focus on Spain for various reasons;

first, because of an apparent lack of literature about the Spanish case, and

second, because of its singular historical context and political economy

that make it an interesting case study. We use a theoretical framework

developed by Hein (2015) based on the Kaleckian model of growth and

distribution. This framework allows us to analyze the effects of

neoliberalism and financialization on income distribution. We also assess

the effects of standard determinants of the labor share, such as trade

globalization, financial globalization, and technological change. All our

variables are integrated of order one, and given the limited size of our

sample, we use an ARDL bound testing model, allowing us to distinguish

between short- and long-term effects. The results confirm that the

financialization process has a negative impact on the Spanish labor share,

particularly through the weakening of workers’ bargaining power, the

declining government activity, and the increasing financial activity. We do

find that the standard variables advanced in the literature are also

important determinants to consider.