IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Capital Market Integration and Wages

  • Peter Henry

    (Graduate School of Business)

  • Diego Sasson

    (Credit Suisse)

Registered author(s):

    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 drives up the level of average annual compensation for each worker in the sample by 609 US dollars—an increase equal to 25 percent 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. Overall, the results suggest that trade in capital may have a larger impact on wages than trade in goods.

    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-siepr.stanford.edu/repec/sip/08-028.pdf
    Download Restriction: no

    Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-028.

    as
    in new window

    Length:
    Date of creation: Mar 2009
    Handle: RePEc:sip:dpaper:08-028
    Contact details of provider: Postal:
    366 Galvez Street, Stanford, California 94305-6015

    Phone: (650) 725-1874
    Fax: (650) 723-8611
    Web page: http://siepr.stanford.edu

    More information through EDIRC

    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. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
    2. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
    3. 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.
    4. Andrei Shleifer & Daniel Wolfenson, 2000. "Investor Protection and Equity Markets," Harvard Institute of Economic Research Working Papers 1906, Harvard - Institute of Economic Research.
    5. Laura Alfaro & Sebnem Kalemli-Ozcan, 2004. "Why doesn't capital flow from rich to poor countries? An empirical investigation," 2004 Meeting Papers 53, Society for Economic Dynamics.
    6. Francesco Caselli & Daniel J. Wilson, 2003. "Importing technology," Working Paper Series 2003-04, Federal Reserve Bank of San Francisco.
    7. Henry, Peter B., 2001. "Is Disinflation Good for the Stock Market?," Research Papers 1681, Stanford University, Graduate School of Business.
    8. Anusha Chari & Peter Henry, 2007. "Firm-Specific Information and the Efficiency of Investment," Discussion Papers 07-005, Stanford Institute for Economic Policy Research.
    9. Alfaro, Laura & Hammel, Eliza, 2007. "Capital flows and capital goods," Journal of International Economics, Elsevier, vol. 72(1), pages 128-150, May.
    10. Wacziarg, Romain & Seddon, Jessica, 2000. "Trade Liberalization and Intersectoral Labor Movements," Research Papers 1652, Stanford University, Graduate School of Business.
    11. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
    12. Peter Blair Henry, 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," NBER Working Papers 12698, National Bureau of Economic Research, Inc.
    13. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    14. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
    15. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
    16. Pierre-Olivier Gourinchas & Olivier Jeanne, 2003. "The Elusive Gains from International Financial Integration," NBER Working Papers 9684, National Bureau of Economic Research, Inc.
    17. Almeida, Rita K., 2003. "The Effects of Foreign Owned Firms on the Labor Market," IZA Discussion Papers 785, Institute for the Study of Labor (IZA).
    18. Peter Blair Henry, 2003. "Capital Account Liberalization, The Cost of Capital, and Economic Growth," NBER Working Papers 9488, National Bureau of Economic Research, Inc.
    19. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers Archive 11375, Iowa State University, Department of Economics.
    20. Robert S. Chirinko, 1993. "Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications," Research Working Paper 93-01, Federal Reserve Bank of Kansas City.
    21. Kose, Ayhan & Prasad, Eswar & Rogoff, Kenneth & Wei, Shang-Jin, 2006. "Financial Globalization: A Reappraisal," CEPR Discussion Papers 5842, C.E.P.R. Discussion Papers.
    22. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    23. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
    24. Stanley Fischer & Ratna Sahay & Carlos A. Végh Gramont, 2002. "Modern Hyper- and High Inflations," IMF Working Papers 02/197, International Monetary Fund.
    25. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    26. David Card, 2009. "Immigration and Inequality," American Economic Review, American Economic Association, vol. 99(2), pages 1-21, May.
    27. Ottaviano, Gianmarco & Peri, Giovanni, 2008. "Immigration and National Wages: Clarifying the Theory and the Empirics," CEPR Discussion Papers 6916, C.E.P.R. Discussion Papers.
    28. 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.
    29. Martin, Philippe & Rogers, Carol Ann, 1995. "Stabilization Policy, Learning by Doing, and Economic Growth," CEPR Discussion Papers 1130, C.E.P.R. Discussion Papers.
    30. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
    31. Galina Hale & Cheryl Long, 2011. "Did Foreign Direct Investment Put an Upward Pressure on Wages in China?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(3), pages 404-430, August.
    32. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
    33. 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.
    34. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
    35. 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(1, 25th A), pages 1-118.
    36. De Long, J. Bradford & Summers, Lawrence H., 1993. "How strongly do developing economies benefit from equipment investment?," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 395-415, December.
    37. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," CSAE Working Paper Series 1995-11, Centre for the Study of African Economies, University of Oxford.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:sip:dpaper:08-028. 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: (Anne Shor)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.