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With particular reference to India and Indonesia.
We take a fresh look at the aggregate and distributional effects of policies to liberalize international capital flows—financial globalization. Both country- and industry-level results suggest that such policies have led on average to limited output gains while contributing to significant increases in inequality—that is, they pose an equity–efficiency trade-off. Behind this average lies considerable heterogeneity in effects depending on country characteristics. Liberalization increases output in countries with high financial depth and those that avoid financial crises, while distributional effects are more pronounced in countries with low financial depth and inclusion and where liberalization is followed by a crisis. Difference-indifference estimates using sectoral data suggest that liberalization episodes reduce the share of labor income, particularly for industries with higher external financial dependence, those with a higher natural propensity to use layoffs to adjust to idiosyncratic shocks, and those with a higher elasticity of substitution between capital and labor. The sectoral results underpin a causal interpretation of the findings using macro data.
In this study, the author hopes to add to the literature concerning the distributional consequences of financial integration by focusing on the rise of non-state actors within a transformed international system. In it, he argues that structural change brought on by transnational production and post-industrialization has created space for non-state actors to acquire autonomy from sovereign entities. While finance is by no means the only specialized sector to achieve autonomy, it has perhaps the most immediate impact on the ability of governments to pursue policy. First published in 1999. Routledge is an imprint of Taylor & Francis, an informa company.
Discusses and assesses the impact of financial liberalization and the ongoing rise of financial rents on income distribution in the post-1980 Turkish economy.
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.
The objective of this paper is to assess both the aggregate growth effects and the distributional consequences of financial liberalization as observed in Thailand from 1976 to 1996. A general equilibrium occupational choice model with two sectors, one without intermediation, and the other with borrowing and lending, is taken to Thai data. Key parameters of the production technology and the distribution of entrepreneurial talent are estimated by maximizing the likelihood of transition into business given initial wealth as observed in two distinct datasets. Other parameters of the model are calibrated to try to match the two decades of growth as well as observed changes in inequality, labor share, savings, and the number of entrepreneurs. Without an expansion in the size of the intermediated sector, Thailand would have evolved very differently, namely, with a drastically lower growth rate, high residual subsistence sector, non-increasing wages, but lower inequality. The financial liberalization brings welfare gains and losses to different subsets of the population. Primary winners are talented would-be entrepreneurs who lack credit and cannot otherwise go into business (or invest little capital). Mean gains for these winners range from 17 to 34 percent of observed overall average household income. But liberalization also induces greater demand by entrepreneurs for workers resulting in increases in the wage and lower profits of relatively rich entrepreneurs of the same order of magnitude as the observed overall average income of firm owners. Foreign capital has no significant impact on growth or the distribution of observed income.This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand financial liberalization and its impact on growth.
We review the debate on the association of financial globalization with inequality. We show that the within-country distributional impact of capital account liberalization is context specific and that different types of flows have different distributional effects. Their overall impact depends on the composition of capital flows, their interaction, and on broader economic and institutional conditions. A comprehensive set of policies – macroeconomic, financial and labor- and product-market specific – is important for facilitating wider sharing of the benefits of financial globalization.
Develops a model to examine the impact of trade liberalization on wages. Argues that trade liberalization will reduce wages in countries which are labour abundant relative to the global economy, if these same countries are capital abundant relative to countries in its reference set.
Throughout the 1990's, privatization of inefficient state-owned enterprises was strongly embraced in developing and transitional economies. Little attention has gone to the distributional implications of the privatization movement, a particularly surprising oversight given the current backlash in many settings against further privatization. This book offers a comprehensive set of country-specific studies on the effects of privatization on people --winners and losers in different income, employment, and education groups. The studies analyze the changes in public tax revenue from privatized enterprises, shifts in pension and other liabilities, and changes in income of different groups. Contributors include David McKenzie (Stanford University), Dilip Mookherjee (Boston University), Gover Barja (Universidad Católica Boliviana, La Paz), Miguel Urquiola (Columbia University), Samuel Freije (Universidad de Las Américas in Puebla, Mexico), Luis A. Rivas (Ministry of Finance and Central Bank of Nicaragua), Máximo Torero, Enrique Schroth, and Alberto Pasco Font (Group of Analysis for Development [GRADE], Lima), Roberto Macedo (University of São Paulo, Presbyterian Mackenzie University, and Foundation Institute of Economic Research, São Paolo), Antonio Estache (World Bank), Michael Bleyzer and Edi Segura (SigmaBleyzer Corporation), Gary H. Jefferson, (Brandeis University), Su Jian (Brandeis and Peking Universities), Jiang Yuan and Yu Xinhua (National Bureau of Statistics, Beijing), and Malathy Knight-John and P.P.A. Wasantha (Institute of Policy Studies, Sri Lanka).