Capital Account Liberalization and Wage Inequality: Evidence from Firm Level Data
IMF Working Papers, March 3, 2023
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- Capital Account Liberalization and Wage Inequality: Evidence from Firm Level Data
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Bibliographic details
- Authors: Kodjovi M. Eklou, Shakeba Foster
- Published: March 3, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400235139.001
Research question and scope
- Investigates the distributional consequences of capital account liberalization on between-firms earning inequality.
- Data universe: firm level data for ASEAN5 countries over the period 1995-2019.
- Pages: 35
- Series: Working Paper No. 2023/048; Volume: 2023; Issue: 048; Stock No: WPIEA2023048; DOI: https://doi.org/10.5089/9798400235139.001; ISBN: 9798400235139; ISSN: 1018-5941.
Key empirical findings
- Between-firms wage dispersion alone accounts for a nontrivial proportion of the variation in the market Gini.
- Capital account liberalization increases between-firms wage inequality.
- Wages grow faster at initially high-paying firms.
- Wages slow down at firms at the lower portion of the wage distribution.
- Results are robust to a battery of robustness checks.
- Direction and category of liberalization matter:
- Effects are pronounced for inflow liberalization.
- Effects are pronounced for equity capital flows.
- Capital account liberalization induces an increase in Profit-to-Wage ratios.
- Heterogeneous impacts depending on country and industry characteristics:
- Country characteristics: wage setting institutions, the level of financial development, and the size of the informal sector.
- Industry characteristics: export orientation and external finance dependence.
Subjects and keywords
- Subject: Balance of payments, Capital account liberalization, Income inequality, Labor, National accounts, Production, Total factor productivity, Wage adjustments, Wages.
- Keywords: baseline result, Capital Account Liberalization, Firm heterogeneity, Income inequality, inflow liberalization, Shakeba foster, Total factor productivity, Wage adjustments, wage dispersion, Wage Inequality, Wages.
Source: IMF Working Papers — "Capital Account Liberalization and Wage Inequality: Evidence from Firm Level Data" by Kodjovi M. Eklou and Shakeba Foster, March 3, 2023.
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