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Income inequality: The aftermath of stock market liberalization in emerging markets

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Author Info
Mitali Das () (Columbia University - Department of Economics)
Sanket Mohapatra () (Columbia University - Department of Economics)

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Abstract

Early research has documented that the large scale equity market liberalizations of the last decade led the subsequent rise in aggregate equity indices, investment booms, capital flows and economic growth. An important and unaddressed issue is the normative question of whether and how these reforms shifted the distribution of incomes in the aftermath of equity market liberalization. In careful empirical analysis, we find a pattern indicating that income share growth accrued almost wholly to the top quintile of the income distribution at the expense of a "middle class" that we define as the three middle quintiles of the income distribution. A surprising finding is that the lowest income share remained effectively unchanged in the event of liberalization. These patterns are robust to the inclusion of a wide variety of controls for global shocks, country specific factors, and contemporaneously implemented privatization and stabilization policies.

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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-42.

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Length: 49 pages
Date of creation: 2002
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Handle: RePEc:clu:wpaper:0102-42

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  5. Bartolini, Leonardo & Drazen, Allan, 1997. "Capital-Account Liberalization as a Signal," American Economic Review, American Economic Association, vol. 87(1), pages 138-54, March. [Downloadable!] (restricted)
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  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank. [Downloadable!]
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  15. Abhijit V. Banerjee & Esther Duflo, 2000. "Inequality and Growth: What Can the Data Say?," NBER Working Papers 7793, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Beach, Charles M & Davidson, Russell, 1983. "Distribution-Free Statistical Inference with Lorenz Curves and Income Shares," Review of Economic Studies, Blackwell Publishing, vol. 50(4), pages 723-35, October. [Downloadable!] (restricted)
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  19. Bekaert, G. & Harvey, C. R. & Lumsdaine, R. L., 2002. "The dynamics of emerging market equity flows," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 295-350, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Eva de Francisco, 2005. "Limited Participation, Income Distribution and Capital Account Liberalization," Computing in Economics and Finance 2005 454, Society for Computational Economics. [Downloadable!]
  2. Brigitte Granville, 2006. "Integrating poverty reduction in IMF-World Bank Models," Working Papers id:502, esocialsciences.com. [Downloadable!]
  3. Lee Chee Tong, 2005. "Does Stock Market Liberalisation Benefit The Economy? Evidence From Industry-Level Data," SCAPE Policy Research Working Paper Series 0516, National University of Singapore, Department of Economics, SCAPE. [Downloadable!]
  4. James Ang, 2008. "Finance And Inequality: The Case Of India," Monash Economics Working Papers 08/08, Monash University, Department of Economics. [Downloadable!]
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  5. Brigitte Granville & Sushanta Mallick, 2005. "How best to link poverty reduction and debt sustainability in IMF--World Bank models?," International Review of Applied Economics, Taylor and Francis Journals, vol. 19(1), pages 67-85, January. [Downloadable!] (restricted)
  6. Haiping Zhang & Jurgen von Hagen, 2007. "A Welfare Analysis of Capital Account Liberalization," Working Papers 19-2007, Singapore Management University, School of Economics. [Downloadable!]
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