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Capital Market Integration and Wages - 财经管理 - 道客巴巴#Capital Market Integration and Wages ANUSHA CHARI PETER BLAIR HENRY AND DIEGO SASSON 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 487 U.S.—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. Correspondence to: Anusha Chari Department of Economics University of North Carolina at Chapel Hill and NBER Mailing Address: CB3305 University of North Carolina Chapel Hill NC 27599 achariunc.edu Peter Blair Henry Department of Economics and Brooking Institution Mailing Address: Stern School of Business New York University New York NY 100012 pbhenrynyu.edu and Diego Sasson Goldman Sachs Asset Management Mailing Address: 200 West Street New York NY 10282 diego.sassongmail.com . Henry gratefully acknowledges financial support from the W.R. Berkley and Richard R. West Professorships the John A. and Cynthia Fry Gunn Faculty Fellowship the Stanford Institute for Economic Policy Research and the Stanford Center for International Development. We thank Sandile Hlatshwayo for excellent research assistance. We also thank Olivier Blanchard Steve Buser Brahima Coulibaly Jonah Gelbach Pierre-Olivier Gourinchas Avner Greif Nir Jaimovich Pete Klenow Anjini Kochar John Pencavel Paul Romer Robert Solow Ewart Thomas and seminar participants at UC Berkeley Brookings the Chicago Fed Claremont McKenna the IMF MIT NIPFP-DEA the Reserve Bank of India and Stanford for helpful comments. All views in the paper are our own. The impact of trade on wages occupies a salient space in the collective imagination of the economics profession. When a country opens up to trade with the rest of the world income shifts away from that country’s scarce factor of production and toward the one which is abundant Stolper and son 1941. Inspired by the celebrated Stolper-son Theorem economics journals abound with articles examining the extent to which trade induces factor price equalization. The evidence so far is mixed. The consensus view suggests that trade with developing countries is at best a modest force behind the large decline in the relative wages of low-skilled workers in rich countries Krugman 1995 Lawrence and Slaughter 1993 Cline 1997 Lawrence 2008.1 In the case of workers in developing countries the evidence actually runs 1 Feenstra and Hanson 2003 provide a dissenting view. 2contrary to the theory. Whereas Stolper-son predicts that trade with rich countries will increase the relative wages of low-skilled workers in poor countries trade liberalization during the 1980s and 1990s actually increased wage inequality in the developing world Goldberg and Pavcnik 2007. Moving from trade in goods to trade in factors an extensive literature also exists on the impact of labor flows on wage inequality. Again the results are mixed. Some studies find that immigration from developing countries exacerbates wage inequality in the U.S. Borjas Freeman and Katz 1997. Others find little to no effect Card 2009 Ottaviano and Peri 2008. While many studies examine the impact of cross-border flows of goods and workers on relative wages the literature pays far less attention to the impact of cross-border financial flows on the absolute level of wages. This is surprising for at least three reasons. First trade in capital between nations has impli ions for real wages that are every bit as important as cross-border movements of goods and people. In emerging economies where capital is scarce and labor abundant opening up to free trade in capital should reduce the rental rate and increase the real wage. Second examining the absolute level of wages provides information about the impact of opening up on the distribution of income between capital and labor that is just as important as the information that studies of wage inequality provide about the distribution of labor income between high and low-skilled workers. For instance many emerging economies experienced unprecedented increases in national income as a result of globalization in the 1980s and 1990s. If all of the income gains from globalization accrued to capital then the rise in wage inequality documented by Goldberg and Pavcnik 2007 necessarily implies that low-skilled workers experienced income losses. On the other hand if total labor income grew in line with or faster than the economy as a whole then high-skilled workers may have experienced income gains that did not result in losses for low-skilled workers. Third in the late 1980s emerging economies all over the world began easing restrictions on capital inflows of all kinds giving economists a series of before-and-after scenarios with which to study the impact of factor flows on factor rewards. A large body of research examines the impact of capital market liberalization on asset prices investment and the growth rate of GDP 3per capita.2 But to the best of our knowledge this literature is silent about the impact of capital account opening on the labor market. Consequently two decades after the onset of capital market liberalization we still have no systematic evidence about the impact of this sea change in policy on the average level of wages in the developing world.3 This paper provides the first systematic attempt to fill that gap. Figure 1 demonstrates that the level of the average annual manufacturing real wage in a sample of twenty-five emerging economies increased significantly after they liberalized restrictions on inflows of foreign capital between 1986 and 1996.4 Formal estimates show that the growth rate of the real wage in local currency terms jumped from 1.8 percent per year in the pre-liberalization period to an average of 5.7 percent in the year liberalization occurred and each of the subsequent three years. The 3.9 percentage-point increase in the growth rate of the real wage during this window drives up the level of average annual compensation for each worker in the sample of liberalizing countries by the local currency equivalent of 487 U.S.—an increase equal to 18 percent of their annual pre-liberalization salary. Insert Figure 1 Here One concern about Figure 1 is that an exogenous worldwide shock unrelated to capital market opening drove up real wages in liberalizing and non-liberalizing countries alike. To distinguish the country-specific impact of liberalization policy from that of a common shock our estimation procedure compares the difference in wage growth before and after liberalization for a group of countries that open up to the same difference for a group of control countries. Our regressions also include year-fixed effects to account for the possibility of common shocks that affect only the liberalizers and country-fixed effects to allow for differences in underlying unobservable factors that may drive variation in wage growth across countries. We also control for the impact of contemporaneous macroeconomic reforms such as inflation stabilization trade liberalization privatization and Brady Plan debt relief programs. In every specifi ion we find an 2 See Henry 2007 and Obstfeld 2009 for comprehensive surveys of this literature. 3 Feenstra and Hanson 1997 explore the cost of capital but focus on its impact on relative wages. Aitken Harrison and Lipsey 1996 Almeida 2007 and Hale and Long 2008 examine FDI and wages but not the general connection between financial flows and wages vis-à-vis the cost of capital. 4 In order to have comparable measures of levels of wages across countries we plot the natural log of the real wage in PPP adjusted U.S. terms. 4economically and statistically significant increase in real wage growth for countries in the liberalization group relative to the control group. An open economy interpretation of the neoclassical growth model provides the cleanest qualitative explanation of the new facts we uncover. Opening up to capital inflows reduces the cost of capital in developing countries and firms respond by increasing their rate of investment. For a given growth rate of the labor force and total factor productivity a higher rate of investment increases the ratio of capital per effective worker driving up the marginal product of labor and in turn the market-clearing wage. Consistent with this chain of logic Figure 2 demonstrates that the growth rate of labor productivity also rises sharply following liberalizations. After controlling for other factors the average growth rate of labor productivity is 9.72 percentage points higher during the four-year liberalization window than it is in non-liberalization years. Insert Figure 2 Here From a quantitative perspective however it is less clear whether the neoclassical model captures all relevant features of the data. In the standard growth model capital account liberalization works strictly through its impact on capital accumulation and has no effect on the growth rate of aggregate total factor productivity Gourinchas and Jeanne 2006. The increase in real wage growth present in the data is too large to be explained exclusively by capital deepening under conventional assumptions about capital shares and the elasticity of substitution. One possible explanation stems from the observation that liberalizations increase the quantity of capital goods that emerging economies import from industrial nations Alfaro and Hammel 2007. If technology diffuses from developed to emerging economies through the technology embodied in capital goods imports à la Eaton and Kortum 1999 2001a b then liberalizations may indeed drive up the growth rate of total factor productivity. While our approach enables us to test previously unexamined real-wage impli ions of capital market opening difference-in-difference estimation requires caution because the standard errors are susceptible to serial correlation Bertrand Duflo and Mullainathan 2004. Opening up to foreign capital increases investment which in turn drives up productivity and wages. Because wages take time to adjust wage growth for a given country may remain elevated above its steady-state rate for a number of years after opening thereby inducing serial correlation in the 5country’s wage-growth residuals. Similarly many countries open up at approximately the same time possibly inducing cross-country correlation in the residuals. Our empirical analysis uses the Petersen 2009 technique to simultaneously adjust the standard errors for the potential presence of both types of correlation in the residuals. No matter how we compute the standard errors the impact of capital market opening on wages and productivity remains economically and statistically significant. The potential endogeneity of the liberalization decision also raises some concerns. If profit-maximizing firms in a financially closed economy face the prospect of rapidly rising labor costs they will want to substitute capital for labor. To the extent that opening up the capital account would reduce the cost of capital these firms have an incentive to lobby the government to do so. If rising wages cause governments to open up then our estimates will spuriously indi e a strong impact of liberalization on wages when causation in fact runs the other way around. While theoretically plausible the endogeneity argument has no empirical support. Figure 1 is not consistent with the view that capital market opening occurs in response to rising labor costs. If anything wage growth actually falls slightly prior to the opening Section IIIC shows that mean reversion à la Ashenfelter 1978 does not drive our results. The data are also not consistent with the explanation that governments liberalize in anticipation of higher future labor costs. Although wages rise sharply following liberalization labor productivity rises even faster so unit labor costs do not increase. Finally with only twenty-five countries in the sample one may worry that a few large outliers drive the central finding. This is not the case. Sign tests show that the median growth rate of real wages in the post-liberalization period exceeds the pre-liberalization median too often to be explained by chance. The rest of the paper proceeds as follows. Section I uses theory to generate testable predictions and explains how we identify real-life liberalization episodes. Section II describes the data and construction of the control group and presents preliminary findings. Section III discusses the empirical methodology main results and alternative interpretations. Section IV examines the consistency of the results with the theory. Section V concludes. 6I. Capital Market Integration in Emerging Economies This section uses an open economy version of the Solow model to generate previously untested predictions about the impact of capital flows on the time-path of the real wage w. The central theoretical point about capital market integration is that it moves emerging economies from a steady state in which their ratios of capital to effective labor are lower and rates of return to capital higher than in the industrialized world toward a steady state in which ratios of capital to effective labor and rates of return are equal in both regions. Because capital and labor are complements in production the marginal product of labor and hence the real wage rises as countries open up and the process of capital deepening sets in. This fundamental insight about capital flows and the dynamic path of wages would also hold in an open economy Ramsey model. Since the focus of the paper is on wages not other variables e.g. the current account that depend on endogenous savings decisions the Solow model provides the most concise exposition. IA. Theory Assume that a country produces output using capital labor and a constant-returns-to-scale production function with labor-augmenting technological progress: 1 .YFKAL Let ALKk be the amount of capital per unit of effective labor and ALYy the amount of output per unit of effective labor. Using this notation and the homogeneity of the production function we have: 2 .yfk Also assume that: the country saves a constant fraction of national income each period and adds it to the capital stock capital depreciates at the rate the labor force grows at the rate n and total factor productivity grows at the rate g. 7When the economy is in steady state k is constant at the level .sstatek and the marginal product of capital equals the interest rate r plus the depreciation rate: 3 ..sstatefkr Because the impact of liberalization works through the cost of capital Equation 3 has important impli ions for the dynamics of kand w in the wake of opening up. Let r denote the exogenously given world interest rate. The standard assumption in the literature is that r is less than r because the rest of the world has more capital per unit of effective labor than the developing country. It is also standard to assume that the developing country is small so that nothing it does affects r. Under these assumptions capital surges in to exploit the difference between r and r when the developing country liberalizes. The absence of any frictions in the model means that the country’s ratio of capital to effective labor jumps immediately from .sstatek to its post-liberalization steady-state level .sstatek. In the post-liberalization steady state the marginal product of capital equals the world interest rate plus the rate of depreciation: 4 ..sstatef.。