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Does Income Inequality Affect Capital Flows? Evidence from Emerging Markets and Developing Economies

Author

Listed:
  • Jorge Carrera

    (CONICET/UNLP/BCRA)

  • Gabriel Montes-Rojas

    (IIEP-BAIRES-UBA/CONICET)

  • Mariquena Solla

    (UNLP/BCRA)

  • Fernando Toledo

    (UNLP/BCRA)

Abstract

We assess the effect of income inequality on capital flows. We differentiate between aggregate capital inflows (external liabilities accumulation) and outflows (external assets accumulation) and disaggregated public andprivate capital inflows and outflows. We estimate dynamic panel data models using annual observations for Emerging Markets and Developing Economies during the 1999-2019 period. We find that the Top 1 and theTop 10 inequality measures are positive and statistically significant for aggregate and private inflows, and the Gini disposable income is statistically significant only for one explored method. The evidence alsoshows that there is a weak effect on private outflows, robust across methods only at the aggregate specification. The results also suggest that financial openness is positively associated with a greater effect ofinequality.

Suggested Citation

  • Jorge Carrera & Gabriel Montes-Rojas & Mariquena Solla & Fernando Toledo, 2023. "Does Income Inequality Affect Capital Flows? Evidence from Emerging Markets and Developing Economies," Working Papers 268, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:268
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/268.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Income Inequality; Capital Flows; Financial Openness; Panel Data Models;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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