Capital account liberalisation does worsen income inequality

Arbeitspapier

This study examines the relationship between capital account liberalisation and income inequality. Adopting a novel identification strategy, namely a difference-in-difference estimation combined with propensity score matching between the liberalised and closed countries, we provide robust evidence that opening the capital account is associated with an adverse impact on income inequality in developing countries. The main findings are threefold. First, fully liberalising the capital account is associated with a small rise of 0.07-0.30 standard deviations in the Gini coefficient in the short-run and a rise as large as 0.32-0.62 standard deviations in the ten years after liberalisation, on average. Second, widening income inequality is the outcome of the growing income share of the rich at the cost of the poor. The long-term effect of capital account liberalisation includes a reduction in the income share of the poorest half by 2.66-3.79 percentage points and an increase in the income share of the richest 10% by 5.19-8.76 percentage points. Third, the directions and categories of capital account liberalisation matter. Inward capital account liberalisation is more detrimental to income equality than outward capital account liberalisation, and free access to the international equity market exacerbates income inequality the most, while foreign direct investment has an insignificant impact on inequality.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IWH Discussion Papers ; No. 7/2020

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement ; International Financial Policy: Financial Transactions Tax; Capital Controls
• Thema: capital account liberalisation ; income inequality ; Gini coefficient ; income share

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Li, Xiang ; Su, Dan
• Ereignis: Veröffentlichung
• (wer): Halle Institute for Economic Research (IWH)
• (wo): Halle (Saale)
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/216816
• URN: urn:nbn:de:101:1-2020071510501507760135
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ