IDEAS home Printed from https://ideas.repec.org/p/aoz/wpaper/268.html

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

Author

Listed:
  • Jorge Carrera

    (CONICET/UNLP/BCRA)

  • Gabriel Montes-Rojas

    (IIEP-BAIRES-UBA/CONICET)

  • Mariquena Solla

    (UNLP/BCRA)

  • Fernando Toledo

    (UNLP/BCRA)

Abstract

We assess the effect of income inequality on capital flows. We differentiate between aggregate capital inflows (external liabilities accumulation) and outflows (external assets accumulation) and disaggregated public andprivate capital inflows and outflows. We estimate dynamic panel data models using annual observations for Emerging Markets and Developing Economies during the 1999-2019 period. We find that the Top 1 and theTop 10 inequality measures are positive and statistically significant for aggregate and private inflows, and the Gini disposable income is statistically significant only for one explored method. The evidence alsoshows that there is a weak effect on private outflows, robust across methods only at the aggregate specification. The results also suggest that financial openness is positively associated with a greater effect ofinequality.

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," Working Papers 268, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:268
    as

    Download full text from publisher

    File URL: https://rednie.eco.unc.edu.ar/files/DT/268.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bun, Maurice J.G. & Kiviet, Jan F., 2006. "The effects of dynamic feedbacks on LS and MM estimator accuracy in panel data models," Journal of Econometrics, Elsevier, vol. 132(2), pages 409-444, June.
    2. David M. Kemme & Bhavik Parikh & Tanja Steigner, 2021. "Inequality, autocracy, and sovereign funds as determinants of foreign portfolio equity flows," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(2), pages 249-278, June.
    3. Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LLC, vol. 5(4), pages 473-500, December.
    4. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    5. Aizenman, Joshua & Ho, Sy-Hoa & Huynh, Luu Duc Toan & Saadaoui, Jamel & Uddin, Gazi Salah, 2024. "Real exchange rate and international reserves in the era of financial integration," Journal of International Money and Finance, Elsevier, vol. 141(C).
    6. Ricardo J. Caballero & Arvind Krishnamurthy, 2009. "Global Imbalances and Financial Fragility," American Economic Review, American Economic Association, vol. 99(2), pages 584-588, May.
    7. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    8. Stefan Avdjiev & Bryan Hardy & Şebnem Kalemli-Özcan & Luis Servén, 2022. "Gross Capital Flows by Banks, Corporates, and Sovereigns," Journal of the European Economic Association, European Economic Association, vol. 20(5), pages 2098-2135.
    9. Corneo, Giacomo, 2015. "Inequality, Public Wealth, and the Federal Shareholder," CEPR Discussion Papers 10920, C.E.P.R. Discussion Papers.
    10. Jae Wook Jung & Kyunghun Kim, 2021. "Financial Market Integration and Income Inequality," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 25(2), pages 175-203.
    11. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    12. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LLC, vol. 9(1), pages 86-136, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Briglauer, Wolfgang, 2014. "The impact of regulation and competition on the migration from old to new communications infrastructure: Recent evidence from EU27 member states," ZEW Discussion Papers 14-085, ZEW - Leibniz Centre for European Economic Research.
    2. Belke, Ansgar & Potrafke, Niklas, 2012. "Does government ideology matter in monetary policy? A panel data analysis for OECD countries," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1126-1139.
    3. Petrick, Martin & Zier, Patrick, 2012. "Common Agricultural Policy effects on dynamic labour use in agriculture," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 37(6), pages 671-678.
    4. Lamar Crombach & Frank Bohn, 2024. "Uninformed voters with (im)precise expectations: Explaining political budget cycle puzzles," Economics and Politics, Wiley Blackwell, vol. 36(1), pages 275-311, March.
    5. Niklas Potrafke & Markus Reischmann, 2012. "Fiscal Equalization Schemes and Fiscal Sustainability," CESifo Working Paper Series 3948, CESifo.
    6. Niklas Potrafke, 2009. "Does government ideology influence political alignment with the U.S.? An empirical analysis of voting in the UN General Assembly," The Review of International Organizations, Springer, vol. 4(3), pages 245-268, September.
    7. Kiviet, Jan F., 2020. "Microeconometric dynamic panel data methods: Model specification and selection issues," Econometrics and Statistics, Elsevier, vol. 13(C), pages 16-45.
    8. Kotschy, Rainer & Sunde, Uwe, 2017. "Democracy, inequality, and institutional quality," European Economic Review, Elsevier, vol. 91(C), pages 209-228.
    9. Christian Bjørnskov & Niklas Potrafke, 2012. "Political Ideology and Economic Freedom Across Canadian Provinces," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 38(2), pages 143-166.
    10. Jan Kiviet & Milan Pleus & Rutger Poldermans, 2017. "Accuracy and Efficiency of Various GMM Inference Techniques in Dynamic Micro Panel Data Models," Econometrics, MDPI, vol. 5(1), pages 1-54, March.
    11. Opolska, Iweta, 2017. "The efficacy of liberalization and privatization in introducing competition into European natural gas markets," Utilities Policy, Elsevier, vol. 48(C), pages 12-21.
    12. Vítor Castro & Rodrigo Martins, 2018. "The Electoral Dynamics of Human Development," Journal of Development Studies, Taylor & Francis Journals, vol. 54(1), pages 191-211, January.
    13. Braunfels, Elias, 2014. "How do Political and Economic Institutions Affect Each Other?," Discussion Paper Series in Economics 19/2014, Norwegian School of Economics, Department of Economics.
    14. Roberto Golinelli & Sandro Momigliano, 2009. "The Cyclical Reaction of Fiscal Policies in the Euro Area: The Role of Modelling Choices and Data Vintages," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 39-72, March.
    15. Badar Nadeem Ashraf & Sidra Arshad & Yuancheng Hu, 2016. "Capital Regulation and Bank Risk-Taking Behavior: Evidence from Pakistan," IJFS, MDPI, vol. 4(3), pages 1-20, August.
    16. Vitor Castro, 2016. "Shades of red and blue: Political ideology and sustainable development," Proceedings of International Academic Conferences 3606234, International Institute of Social and Economic Sciences.
    17. Castro, Vítor & Martins, Rodrigo, 2021. "Government ideology and economic freedom," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 73-91.
    18. Toke S. Aidt & Vitor Castro & Rodrigo Martins, 2018. "Shades of red and blue: government ideology and sustainable development," Public Choice, Springer, vol. 175(3), pages 303-323, June.
    19. Kretschmer, Bettina & Hübler, Michael & Nunnenkamp, Peter, 2010. "Does foreign aid reduce energy and carbon intensities in developing countries?," Kiel Working Papers 1598, Kiel Institute for the World Economy.
    20. Roberto Dell'Anno & Adalgiso Amendola, 2015. "Social Exclusion and Economic Growth: An Empirical Investigation in European Economies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 274-301, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aoz:wpaper:268. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Laura Inés D Amato (email available below). General contact details of provider: https://edirc.repec.org/data/redniar.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.