Opposition to capital market opening
We employ a neoclassical growth model to assess the impact of financial liberalization in a developing country on capital owners` and workers` consumption and welfare. We find in a baseline calibration for an average non-OECD country that capitalists suffer a 42 percent reduction in permanent consumption because capital inflows reduce their return to capital while workers gain 8 percent of permanent consumption because capital inflows increase wages. These huge gross impacts contrast with the small positive net effect found in a neoclassical represent agent model by Gourinchas and Jeanne (2006). We further show that the result for capitalists is insensitive to enhanced productivity catch-up processes induced by capital inflows. Our findings can help explain why poorer countries tend to be less financially open as capitalists` losses are largest for countries with the lowest capital stocks, inducing strong opposition to capital market opening.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (030) 838 2272
Fax: (030) 838 2129
Web page: http://www.wiwiss.fu-berlin.de/en/index.html
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.:
- Aizenman, Joshua, 2005. "Opposition to FDI and financial shocks," Journal of Development Economics, Elsevier, vol. 77(2), pages 467-476, August.
- Theodore H. Moran & Edward M. Graham & Magnus Blomstrom, 2005. "Does Foreign Direct Investment Promote Development?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3810, May.
- Fernando Broner & Jaume Ventura, 2010.
"Rethinking the Effects of Financial Liberalization,"
509, Barcelona Graduate School of Economics.
- Fernando A. Broner & Jaume Ventura, 2010. "Rethinking the Effects of Financial Liberalization," NBER Working Papers 16640, National Bureau of Economic Research, Inc.
- Broner, Fernando A & Ventura, Jaume, 2010. "Rethinking the Effects of Financial Liberalization," CEPR Discussion Papers 8171, C.E.P.R. Discussion Papers.
- Fernando Broner & Jaume Ventura, 2010. "Rethinking the effects of financial liberalization," Economics Working Papers 1128, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2013.
- Jaume Ventura & Fernando Broner, 2008. "Rethinking the effects of financial liberalization," 2008 Meeting Papers 747, Society for Economic Dynamics.
- Reinhardt, Dennis & Ricci, Luca Antonio & Tressel, Thierry, 2013.
"International capital flows and development: financial openness matters,"
Bank of England working papers
472, Bank of England.
- Reinhardt, Dennis & Ricci, Luca Antonio & Tressel, Thierry, 2013. "International capital flows and development: Financial openness matters," Journal of International Economics, Elsevier, vol. 91(2), pages 235-251.
- Luca Antonio Ricci & Thierry Tressel & Dennis B. S. Reinhardt, 2010. "International Capital Flows and Development: Financial Openness Matters," IMF Working Papers 10/235, International Monetary Fund.
- Dennis Reinhardt & Luca Antonio Ricci & Thierry Tressel, 2012. "International Capital Flows and Development - Financial Openness Matters," IHEID Working Papers 11-2012, Economics Section, The Graduate Institute of International Studies.
- Ben Gardiner & Ron Martin & Tyler Peter, 2004. "Competitiveness, Productivity and Economic Growth across the European Regions," ERSA conference papers ersa04p333, European Regional Science Association.
- Pablo M. Pinto & Santiago M. Pinto, 2008. "The Politics Of Investment Partisanship: And The Sectoral Allocation Of Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 20(2), pages 216-254, 06.
- Crespo Jorge & Martín Carmela & Velázquez Francisco J, 2004. "The Role of International Technology Spillovers in the Economic Growth of the OECD Countries," Global Economy Journal, De Gruyter, vol. 4(2), pages 1-20, December.
- Hoxha, Indrit & Kalemli-Ozcan, Sebnem & Vollrath, Dietrich, 2013.
"How big are the gains from international financial integration?,"
Journal of Development Economics,
Elsevier, vol. 103(C), pages 90-98.
- Sebnem Kalemli-Ozcan & Dietrich Vollrath & Indrit Hoxa, 2009. "How Big Are The Gains From International Financial Integration?," 2009 Meeting Papers 143, Society for Economic Dynamics.
- Indrit Hoxha & Sebnem Kalemli-Ozcan & Dietrich Vollrath, 2009. "How Big are the Gains from International Financial Integration?," NBER Working Papers 14636, National Bureau of Economic Research, Inc.
- Hoxha, Indrit & Kalemli-Ozcan, Sebnem & Vollrath, Dietrich, 2011. "How Big are the Gains from International Financial Integration?," CEPR Discussion Papers 8647, C.E.P.R. Discussion Papers.
- An, Galina & Iyigun, Murat F., 2004. "The export skill content, learning by exporting and economic growth," Economics Letters, Elsevier, vol. 84(1), pages 29-34, July.
When requesting a correction, please mention this item's handle: RePEc:zbw:fubsbe:201117. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.