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American Economic Journal: Macroeconomics: Vol. 4 No. 2 (April 2012)

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Capital Market Integration and Wages

Article Citation

Chari, Anusha, Peter Blair Henry, and Diego Sasson. 2012. "Capital Market Integration and Wages." American Economic Journal: Macroeconomics, 4(2): 102-32.

DOI: 10.1257/mac.4.2.102

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 that do not liberalize. The temporary increase in wage growth drives up the level of the average worker's annual compensation by US $487—an increase equal to nearly one-fifth of their annual pre-liberalization salary. Overall, the results suggest that trade in capital may have a larger impact on wages than trade in goods. (JEL E25, E44, F16, F43, G18, O16)

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Authors

Chari, Anusha (U NC)
Henry, Peter Blair (NYU)
Sasson, Diego (Goldman Sachs Asset Management, New York, NY)

JEL Classifications

E25: Aggregate Factor Income Distribution
E44: Financial Markets and the Macroeconomy
F16: Trade and Labor Market Interactions
F43: Economic Growth of Open Economies
G18: General Financial Markets: Government Policy and Regulation
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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American Economic Journal: Macroeconomics


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