Capital Market Integration and Wages

Anusha Chari, Peter Henry and Diego Sasson

No 15204, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: For three years after the typical emerging economy opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of three. No such increase occurs in a control group of countries. The temporary increase in the growth rate of the real wage drives up the level of average annual compensation for each worker in the sample by 487 US dollars--an increase equal to nearly one-fifth of their annual pre-liberalization salary. The increase in the growth rate of labor productivity in the aftermath of liberalization exceeds the increase in the growth rate of the real wage so that the increase in workers' incomes does not drive up unit labor costs. Overall, the results suggest that trade in capital may have a larger impact on wages than trade in goods.

JEL-codes: E2 F15 F3 F41 F43 O4 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-lab and nep-mac
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Published as Anusha Chari & Peter Blair Henry & Diego Sasson, 2012. "Capital Market Integration and Wages," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 102-32, April.

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