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http://hdl.handle.net/10419/49916
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| Title: | | Opposition to capital market opening  |
| Authors: | | Engler, Philipp Wulff, Alexander |
| Issue Date: | | 2011 |
| Series/Report no.: | | School of Business & Economics Discussion Paper: Economics 2011/17 |
| Abstract: | | 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. |
| Subjects: | | Capital flows international financial integration growth neoclassical model heterogenous agents |
| JEL: | | F2 F3 F43 E13 E25 O11 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Diskussionsbeiträge, FB Wirtschaftswissenschaft, FU Berlin
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