ادغام بازار سرمایه، رشد و توزیع درآمد

The paper considers a two-country model of overlapping generation heterogenous economies with intergenerational transfers carried out in the form of bequest and investment in human capital. We examine in competitive equilibrium the transitory and long-run effects of capital markets integration. First, we explore how the regime of public education affects the dynamics of the integrated economy. Second, we study the effects of capital markets integration, in equilibrium, on the intragenerational income distribution in both the host and investing country.

Although financial markets progressed gradually towards a competitive global industry during the 1980s, the integration of these markets gathered speed during the 1990s. The European Community's single market in financial services and the banking reforms in major advanced countries contributed largely to this process. Consequently, gross flows of portfolio and foreign direct investment more than tripled between the mid-1980s and the mid-1990s and the cross-border transactions in bonds and equities currently surpass the value of most advanced countries’ GDP (see, e.g., International Monetary Fund, 1998). Given these facts, and in the light of the recent Asian financial crisis, the study of the effects of free capital movements assumes increasing significance. The main objective of this paper is to examine the dynamic effects of the capital markets integration (CMI) upon: (a) Aggregate production and its allocation between countries. (b) The distribution of incomes in the capital-importing and capital-exporting countries. The framework we shall use to analyze these issues is a two-country overlapping generations (OLG) economies with intergenerational links.1 There are two main features in our economies: (a) Intergenerational transfers, motivated by altruism between parents and their offspring, exist and are accomplished via transfers of physical capital and investment in educating the younger generation; (b) Heterogeneity of consumers in each generation. The significance of these intergenerational transfers to capital accumulation and growth has been extensively studied in the literature in the last two decades. Let us mention few examples, out of many: Kotlikoff and Summers (1981), Becker and Tomes (1986), Gale and Scholz (1994), Bernheim (1991), Lord and Rangazas (1991) and Horioka et al. (2000). Intergenerational transfers, in their various forms, are among the significant factors affecting inequality in the distribution of income, hence our model includes this feature. The main reason for considering heterogenous population is our aim to study the impact of CMI on inequality in distribution of intragenerational income in the “domestic country”, from which (by assumption) initially capital flows, and the “foreign country” which enjoys incoming capital. These issues have not been explored in the literature, particularly not in a dynamic framework.2 As capital integration affects wages and interest rates in different countries in different ways, the relative sizes of investment in education and bequest transfers change differently across countries and across individuals. Equilibrium levels of physical capital, effective labor and output will therefore differ between integrated economies. Heterogeneity results from two sources: intergenerational transfers vary across families and the human capital is distributed across individuals in a nondegenerate way (hence labor earnings differ). Due to investments in human capital, which is a factor of production, the economy exhibits endogenous growth. As in Lucas (1988), Azariadis and Drazen (1990), Fischer and Serra (1996), van Marrewijk (1999) and others, production is constrained by education and work experience. Models in which both physical capital and human capital are used in production, as in our case, are abound. However, we shall concentrate on comparison, period by period, of non-stationary competitive equilibria of two countries once under autarky and then under (full) capital mobility which takes place at date 0.3 In this paper we concentrate on public provision of education that local governments finance by taxing wage income. Though we could have dealt with private education equally well, our choice accounts for the large contribution, in most countries, of the public sector to education and to the enhancement of human capital. It was shown by Glomm and Ravikumar (1992) that majority voting results in a public educational system as long as the income distribution is negatively skewed. Cardak (1999) strengthens this result by considering a voting mechanism where the median preference for education expenditure, rather than median income household, is the decisive voter. The analysis we present here suggests a distinction between the input for education (the time spent teaching) and education spending by governments. In our case, the former is equal to the labor income tax while the latter is endogenous. In essence, this reflects the coordinated education policy of the European Union after introducing the European Credit and Transfer System based on educational requirements like curriculum, teaching material and contact hours. The distinction is important since in an open regime where markets for physical capital are integrated, there exists upward pressure on wages in the country poor in physical capital and makes it therefore more costly to finance a similar level of human capital. By assuming that local governments finance education by taxing labor earnings, the immobile factor, we allow for an efficient zoning policy. A tax on mobile capital would have the additional difficulty that can cause an inefficient distribution of public goods across regions because of positive and negative externalities associated with investment inflows and outflows (see, e.g., Wilson, 1987). There are three main motivations for our analysis. First, to analyze the effects of CMI on income equality. Evidence of a rise in income inequality has been observed in a large number of OECD countries. There is a widely held belief that this rise is driven by events like progress in information technology, globalization of world trade and financial markets. Others believe that social norms are crucial determinants of earnings inequality (e.g., Atkinson, 1999). Given this debate it seems important to us to determine the changes in income inequality resulting from capital markets integration. Second, to study the dynamic effect of CMI on growth. A recent literature discusses the factors that increase the rate at which poor and rich countries converge. For example, Barro et al. (1995) consider capital mobility in a neoclassical growth model. Fischer and Serra (1996) study how trade changes the rate of income convergence under endogenous growth. A different issue, though related to income convergence, is the relationship between national gains and free capital movements. Here, one distinguishes between the gains from trade effect and the growth effect of CMI. A large part of the literature has been devoted to the first question, mostly in static models (e.g., Ruffin, 1985). We shall discuss both issues in this paper. Third, to look at the partition of gains between the capital importing and the capital exporting countries. The bulk of international capital flows takes place between industrialized countries while capital flows to developing countries fall short of the flows predicted by the theory. In this regard, it is important to derive the determinants of each country's share in the limited global capital available for investments. While we are aware of previous research on differences in cross-country returns to capital (see, e.g., Lucas, 1990; Leiderman and Razin, 1994), we have not seen in the literature theoretical results regarding the allocation of world output among countries following capital markets integration. We consider two countries with given initial capital holdings and human capital distributions. Comparing the equilibrium path under autarky with the equilibrium obtained when capital markets are integrated, we derive the following results: (a) Aggregate output in the integrated economy is higher in all subsequent periods; (b) We find how production and capital are allocated among participating countries, following CMI, and identify an implementation paradox: first generations gain in terms of welfare from CMI and, in spite of their altruism, they will decide in favor of integration even if later generations lose; (c) Inequality in intragenerational income distributions, following CMI, changes in all dates. If the two countries differ only in initial intergenerational transfers and human capital distributions (hence aggregate capital stocks differ), intragenerational income distributions change according to the flow of capital in the first period: more equality in the distribution of the ‘wealthier country’ and less equality for the capital-receiving country. However, if the two countries differ only in the initial aggregate capital stock then integration yields equally distributed incomes in each subsequent period, contrary to the case of autarkic equilibrium. These theoretical results are new to the economic literature. The rest of the paper is organized as follows. The next section presents the two-country OLG economies, under public education regime, and characterizes the autarky equilibrium. Section 3 studies the effects that capital markets integration will have on production, capital stocks and human capital levels. Section 4 considers the effects of CMI on intragenerational income distributions. Section 5 concludes the paper. The appendix contains the proofs.