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Capital Market Integration and Wages

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Author Info

  • Anusha Chari
  • Peter Blair Henry
  • Diego Sasson

Abstract

For three years after the typical emerging economy opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of three. No such increase occurs in a control group of countries that do not liberalize. The temporary increase in wage growth drives up the level of the average worker's annual compensation by US $487—an increase equal to nearly one-fifth of their annual pre-liberalization salary. Overall, the results suggest that trade in capital may have a larger impact on wages than trade in goods. (JEL E25, E44, F16, F43, G18, O16)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 4 (2012)
Issue (Month): 2 (April)
Pages: 102-32

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Handle: RePEc:aea:aejmac:v:4:y:2012:i:2:p:102-32

Note: DOI: 10.1257/mac.4.2.102
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Citations

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Cited by:
  1. Philipp an de Meulen, 2011. "Labor Heterogeneity and the Risk of Expropriation in Less Developed Countries," Ruhr Economic Papers 0298, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Eden, Maya, 2013. "International liquidity rents," Policy Research Working Paper Series 6462, The World Bank.

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