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Opposition to capital market opening

  • We employ a neoclassical growth model to assess the impact of financial liberalization in a developing country on capital owners' and workers' consumption and welfare. We find for an average non-OECD country that capital owners suffer a 42% reduction in permanent consumption because capital inflows reduce their return to capital while workers gain 8% of permanent consumption because capital inflows increase wages. These huge gross impacts contrast with the small positive net effect found in a neoclassical representative agent model by Gourinchas and Jeanne (2006). Our findings provide an estimate of the amount of redistribution needed to overcome capitalists' opposition to capital inflows.

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Author:Philipp Engler, Alexander Wulff
ISSN:1350-4851 (print)
ISSN:1466-4291 (online)
Parent Title (English):Applied economics letters
Publisher:Routledge, Taylor & Francis Group
Place of publication:Abingdon
Document Type:Article
Year of first Publication:2014
Year of Completion:2014
Release Date:2017/03/27
Tag:capital flows; distributional effects; international financial integration
First Page:425
Last Page:428
Organizational units:Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften
Peer Review:Referiert