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Does Income Inequality Affect Capital Flows? Evidence from Emerging Markets and Developing Economies

Author

Listed:
  • Jorge Carrera

    (Banco Central de la República Argentina (BCRA). Buenos Aires, Argentina.)

  • Gabriel Montes-Rojas

    (CONICET–Universidad de Buenos Aires. Instituto Interdisciplinario de Economía Política (IIEP). Buenos Aires, Argentina.)

  • Mariquena Solla

    (Universidad Nacional de La Plata (UNLP). La Plata, Argentina.)

  • Fernando Toledo

    (Universidad Nacional de La Plata (UNLP). La Plata, Argentina.)

Abstract

We evaluate the effect of income inequality on capital flows. We distinguish between inflows and outflows of aggregate capital (accumulation of external liabilities and assets) and disaggregated public and private capital flows. Using dynamic panel data models for a sample of emerging markets and developing economies during 1999–2019, we find that the top 1 and 10 income shares are positive and significant for aggregate and private inflows, while the disposable Gini index is only significant for one specification. Financial openness amplifies these effects.

Suggested Citation

  • Jorge Carrera & Gabriel Montes-Rojas & Mariquena Solla & Fernando Toledo, 2023. "Does Income Inequality Affect Capital Flows? Evidence from Emerging Markets and Developing Economies," Documentos de trabajo del Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET) 2023-86, Universidad de Buenos Aires, Facultad de Ciencias Económicas, Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET).
    • Handle: RePEc:ake:iiepdt:2023-86
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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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