On the Welfare Implications of Financial Globalization without Financial Development

It is widely argued that countries can reap large gains from liberalizing their capital accounts if financial globalization is accompanied by the development of domestic institutions and financial markets. However, if liberalization does not lead to financial development, globalization can result in adverse effects on social welfare and the distribution of wealth. We use a multi-country model with non-insurable idiosyncratic risk to show that, if countries differ in the degree of asset market incompleteness, financial globalization hurts the poor in countries with less developed financial markets. This is because in these countries liberalization leads to an increase in the cost of borrowing, which is harmful for those heavily leveraged, i.e. the poor. Quantitative analysis shows that the welfare effects are sizable and may justify policy intervention.

Desigualdad, ¿qué sabemos?

En este artículo repaso el estado actual de nuestros conocimientos sobre: qué factores justifican la desigualdad en, renta g riqueza entre las familias. En particular reivindico la suficiencia de los shocks a la renta como mecanismo generador de diferencias de riqueza entre los hogares

Monopoly rights can reduce income big time.

Abstract We ask for which part of the observed cross-country differences in the level of per-capita income monopoly rights can account. We answer this question in a calibrated growth model with capital. Monopoly rights in the capital-producing sector shield labor market insiders from the competition by outsiders and permit coalitions of these insiders to choose inefficient technologies or working practices. We find that monopoly rights can reduce the level of per-capita income by quantitatively substantial amounts that are much larger than previously claimed. Moreover, the effects of monopoly rights on the price of capital goods relative to consumption goods and the investment share in output are quantitatively consistent with the Penn World Tables. The key to our findings is that monopoly rights in the capital-producing sector do not only reduce total factor productivity there but also increase the relative price of capital. This reduces the capital-labor ratio in the rest of the economy

Shielding the Poor: Social Protection in the Developing World

Shielding the Poor presents a group of studies on social protection in the developing world from leading researchers. These studies address the issue of vulnerability of the poor to adverse shocks and propose policies to increase their protection and coping capacity. The studies emphasize the need for building permanent institutional structures that help reduce and manage the risks that households face as part of a coherent long-term strategy to reduce poverty and promote social equity. The articles included in this book were presented at the conference, "Social Protection and Poverty," held at the Inter-American Development Bank in February, 1999 in Washington, DC.