Capital Account Liberalization and Inequality

ByDavide Furceri, Prakash Loungani

November 24, 2015

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the distributional impact of capital account liberalization. Using panel data for 149 countries from 1970 to 2010, we find that, on average, capital account liberalization reforms increase inequality and reduce the labor share of income in the short and medium term. We also find that the level of financial development and the occurrence of crises play a key role in shaping the response of inequality to capital account liberalization reforms.

Subject: Balance of payments, Capital account, Capital account liberalization, Income distribution, Income inequality, National accounts, Personal income

Keywords: capital account, Capital account, Capital account liberalization, capital account liberalization reforms lead, Capital Account Openness, capital liberalization episode, Crises, effect of liberalization, Gini growth, Global, Globalization, globalization reform, impact of capital account liberalization reform, Impulse response functions, Income distribution, Income inequality, Inequality, Institutions, liberalization date, liberalization reform, occurrence of a liberalization reform, occurrence of the liberalization reform, Personal income, WP

Pages:
26
Volume:
2015
DOI:
https://doi.org/10.5089/9781513531083.001
Issue:
243
Series:
Working Paper No. 2015/243
Stock No:
WPIEA2015243
ISBN:
9781513531083
ISSN:
1018-5941

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