Capital Account Liberalization and Inequality

Davide Furceri and Prakash Loungani

No 2015/243, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; Globalization; Inequality; Capital Account Openness; Crises; Institutions; capital account; capital liberalization episode; liberalization reform; liberalization date; Impulse response functions; impact of capital account liberalization reform; effect of liberalization; occurrence of the liberalization reform; occurrence of a liberalization reform; globalization reform; capital account liberalization reforms lead; Gini growth; Capital account liberalization; Income inequality; Capital account; Personal income; Income distribution; Global (search for similar items in EconPapers)
Pages: 26
Date: 2015-11-24
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Citations: View citations in EconPapers (48)

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