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Limited Participation, Income Distribution and Capital Account Liberalization

Author

Listed:
  • Eva de Francisco

    (Macroanalysis CBO)

Abstract
This paper examines theoretically, using a two-country real-business-cycle model, the effects of capital-market liberalization when there is limited participation in national financial markets. It is assumed that workers cannot smooth consumption as well as do stockholders, and therefore, liberalization may hurt workers. This dynamic model evaluates some claims---made particularly by the "anti-globalization" movement---that capital movements hurt workers, while benefitting stockholders. Quantitatively, liberalization makes workers better off in the long run, since the new capital allocation and increased insurance foster capital accumulation, raising wages that offset the output fluctuations due to capital flows. However, transitional effects may overturn these long-run benefits

Suggested Citation

  • Eva de Francisco, 2005. "Limited Participation, Income Distribution and Capital Account Liberalization," Computing in Economics and Finance 2005 454, Society for Computational Economics.
    • Handle: RePEc:sce:scecf5:454
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    File URL: http://repec.org/sce2005/up.15365.1107790488.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Capital Account Liberalization; Globalization and Limited Participation;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F30 - International Economics - - International Finance - - - General

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