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Capital Account Liberalization, Real Wages, and Productivity

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Author Info
Henry, Peter B. (Stanford U)
Sasson, Diego

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Abstract

For three years after the typical developing country 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 seven. No such increase occurs in a control group of developing countries. The temporary increase in the growth rate of the real wage permanently drives up the level of average annual compensation for each worker in the sample by 752 US dollars--an increase equal to more than a quarter of their annual pre-liberalization salary. The increase in the growth rate of labor productivity in the aftermath of liberalization exceeds the increase in the growth rate of the real wage so that the increase in workers' incomes actually coincides with a rise in manufacturing sector profitability.

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Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1988.

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Date of creation: Feb 2008
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Handle: RePEc:ecl:stabus:1988

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  16. Peter Blair Henry, 2003. "Capital Account Liberalization, The Cost of Capital, and Economic Growth," NBER Working Papers 9488, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Joseph E. Stiglitz, 1999. "Reforming the Global Economic Architecture: Lessons from Recent Crises," Journal of Finance, American Finance Association, vol. 54(4), pages 1508-1522, 08. [Downloadable!] (restricted)
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  22. Pierre-Olivier Gourinchas & Olivier Jeanne, 2006. "The Elusive Gains from International Financial Integration," Review of Economic Studies, Blackwell Publishing, vol. 73(3), pages 715-741, 07. [Downloadable!] (restricted)
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  23. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June. [Downloadable!] (restricted)
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  24. Peter Blair Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 887-935, December.
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  25. Rene M. Stulz, 2005. "The Limits of Financial Globalization," NBER Working Papers 11070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Caballero, Ricardo J, 1994. "Small Sample Bias and Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 52-58, February. [Downloadable!] (restricted)
  27. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," NBER Working Papers 8178, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  28. Chari, Anusha & Blair Henry, Peter, 2008. "Firm-specific information and the efficiency of investment," Journal of Financial Economics, Elsevier, vol. 87(3), pages 636-655, March. [Downloadable!] (restricted)
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  29. Stulz, Rene M., 2005. "The Limits of Financial Globalization," Working Paper Series 2005-1, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  30. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-1), pages 1-118. [Downloadable!]
  31. Peter Blair Henry, 2002. "Is Disinflation Good for the Stock Market?," Journal of Finance, American Finance Association, vol. 57(4), pages 1617-1648, 08. [Downloadable!] (restricted)
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  32. Brahima Coulibaly & Jonathan Millar, 2007. "Estimating the long-run user cost elasticity for a small open economy: evidence using data from South Africa," Finance and Economics Discussion Series 2007-25, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  33. Peter Blair Henry, 2000. "Stock Market Liberalization, Economic Reform, and Emerging Market Equity Prices," Journal of Finance, American Finance Association, vol. 55(2), pages 529-564, 04. [Downloadable!] (restricted)
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(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. M. Ayhan Kose & Eswar Prasad & Marco Terrones, 2008. "Does Openness to International Financial Flows Raise Productivity Growth?," IMF Working Papers 08/242, International Monetary Fund. [Downloadable!]
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  2. Philip Arestis & Asena Caner, 2008. "Capital Account Liberalization and Poverty: How Close is the Link?," Working Papers 0811, TOBB University of Economics and Technology, Department of Economics. [Downloadable!]
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