Advanced Search
MyIDEAS: Login to save this paper or follow this series

Limited Participation, Income Distribution and Capital-Account Liberalization: Working Paper 2005-02

Contents:

Author Info

  • Eva de Francisco
Registered author(s):

    Abstract

    In the late 1980s and the early 1990s, many nations began implementing a wave of economic reforms. Among those reforms was capital-account liberalization. As a result, international financial markets are substantially more active today than 20 years ago, although there are still many countries with various sorts of capital controls. Economic theory predicts that a complete opening of all financial markets should be welfare-improving; intertemporal consumption smoothing, consumption insurance, and better allocation of investment across countries would presumably all contribute their share to this. However, it is not clear what effect partial liberalization (liberalization in the presence of other frictions that cannot be eliminated) would have. In this case Pareto improvements are not guaranteed and, at the very least, some groups may lose from liberalization while others gain. A complete account of the actual experience from past liberalizations is yet to be made; see, for example, the survey of empirical research by Das and Mohapatra (2003). The purpose of this paper, however, is theoretical, studying the effects of capital-account liberalization in conjunction with a particular friction: limited participation in the stock market. In other words, this paper studies whether the fact that some nationals do not have access to stock markets could limit the benefits of international liberalization, whether in size or in the differential impact across groups in society.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/61xx/doc6143/2005-02.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Congressional Budget Office in its series Working Papers with number 16302.

    as in new window
    Length:
    Date of creation: 01 Mar 2005
    Date of revision:
    Handle: RePEc:cbo:wpaper:16302

    Contact details of provider:
    Postal: Second and D Streets, SW, Washington, DC 20515
    Phone: (202)226-2600
    Fax: (202)226-2714
    Web page: http://www.cbo.gov
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Cole, Harold L. & Obstfeld, Maurice, 1991. "Commodity trade and international risk sharing : How much do financial markets matter?," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 3-24, August.
    2. Philippe Bacchetta & Eric van Wincoop, 1998. "Capital flows to Emerging Markets: Liberalization, Overshooting, and Volatility," Working Papers 98.01, Swiss National Bank, Study Center Gerzensee.
    3. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
    4. Marianne Baxter & Urban J. Jermann & Robert G. King, 1995. "Nontraded Goods, Nontraded Factors, and International Non-Diversification," NBER Working Papers 5175, National Bureau of Economic Research, Inc.
    5. Mitali Das & Sanket Mohapatra, 2002. "Income inequality: The aftermath of stock market liberalization in emerging markets," Discussion Papers 0102-42, Columbia University, Department of Economics.
    6. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    7. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-22, April.
    8. Maurice Obstfeld, 1992. "Risk-Taking, Global Diversification, and Growth," NBER Working Papers 4093, National Bureau of Economic Research, Inc.
    9. Enrique G. Mendoza & Linda L. Tesar, 2003. "A Quantitative Analysis of Tax Competition v. Tax Coordination under Perfect Capital Mobility," Working Papers 507, Research Seminar in International Economics, University of Michigan.
    10. Marianne Baxter & Mario J. Crucini, 1994. "Business Cycles and the Asset Structure of Foreign Trade," NBER Working Papers 4975, National Bureau of Economic Research, Inc.
    11. M. Fatih Guvenen, 2003. "A Parsimonious Macroeconomic Model for Asset Pricing: Habit Formation or Cross-sectional Heterogeneity?," RCER Working Papers 499, University of Rochester - Center for Economic Research (RCER).
    12. Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, vol. 29(1), pages 97-112, March.
    13. Anusha Chari & Peter Blair Henry, 2001. "Stock Market Liberalizations and the Repricing of Systematic Risk," NBER Working Papers 8265, National Bureau of Economic Research, Inc.
    14. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
    15. Albuquerque, Rui & Rebelo, Sergio, 2000. "On the dynamics of trade reform," Journal of International Economics, Elsevier, vol. 51(1), pages 21-47, June.
    16. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    17. van Wincoop, Eric, 1996. " A Multi-country Real Business Cycle Model with Heterogeneous Agents," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 233-51, June.
    18. Krusell, Per, 2002. "Time-consistent redistribution," European Economic Review, Elsevier, vol. 46(4-5), pages 755-769, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cbo:wpaper:16302. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.