Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/317730 
Year of Publication: 
2023
Citation: 
[Journal:] Review of World Economics [ISSN:] 1610-2886 [Volume:] 160 [Issue:] 2 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2023 [Pages:] 585-613
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
In this paper, we present empirical evidence that higher income inequality is associated with a greater equity share in countries’ external liabilities, and we develop a theoretical model that can explain this observation: In a small open economy with traded and non-traded goods, entry barriers depress entrepreneurial activity in non-traded industries and raise income inequality. The small number of domestic non-traded goods firms leaves room for foreign firms to operate on the domestic market, and it reduces external borrowing. The model thus suggests that barriers to entrepreneurial activity raise both inequality and the equity share in foreign liabilities. Our empirical results lend some support to this conjecture.
Subjects: 
Foreign direct investment
Portfolio equity
External debt
External liabilities
Income inequality
JEL: 
D31
F21
F34
F36
F41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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