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Effects of Capital Flow Management Measures on Wealth Inequality: New Evidence from Counterfactual Estimators

Author

Listed:
  • Yang Zhou

    (Institute of Developing Economies, Japan External Trade Organization and Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN)

  • Shigeto Kitano

    (Research Institute for Economics and Business Administration (RIEB), Kobe University, JAPAN)

Abstract

We provide cross-country evidence that variations in capital flow management measures (CFMs) result in differences in wealth inequality and distribution by using counterfactual estimators for causal inference. The imposition of aggregate CFMs increases wealth inequality in advanced economies, and the imposition of aggregate CFMs on outflows increases wealth inequality in emerging economies significantly. Diverging from previous studies, we analyze the impacts of ten distinct asset-specific CFMs. In particular, the imposition of the related CFMs to money market and derivatives reduces wealth inequality significantly. The decrease in wealth inequality is due to a decrease in the wealth shares of the top 1% and 10% groups along with an increase in the wealth shares of the middle 40% and bottom 50%. Overall, the effects of CFMs on wealth inequality and distribution are quite heterogeneous; they depend on income levels, capital flow directions, and asset categories.

Suggested Citation

  • Yang Zhou & Shigeto Kitano, 2024. "Effects of Capital Flow Management Measures on Wealth Inequality: New Evidence from Counterfactual Estimators," Discussion Paper Series DP2024-30, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2024-30
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2024-30.pdf
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    More about this item

    Keywords

    Capital flow management measures (CFMs); Wealth inequality; Gini coefficient; Wealth distribution; Counterfactual estimator;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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