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Opposition to capital market opening

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  • Philipp Engler
  • Alexander Wulff

Abstract

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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  • Philipp Engler & Alexander Wulff, 2014. "Opposition to capital market opening," Applied Economics Letters, Taylor & Francis Journals, vol. 21(6), pages 425-428, April.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:6:p:425-428
    DOI: 10.1080/13504851.2013.868579
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    Cited by:

    1. Siraj G. Bawa & Nam T. Vu, 2020. "International effects of corporate tax cuts on income distribution," Review of International Economics, Wiley Blackwell, vol. 28(5), pages 1164-1190, November.

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    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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