Financial Globalization vs. Income Inequality: The Surprising Role of Delegated Portfolio Flows in Taming the Top 1%
54 Pages Posted: 11 Feb 2021
There are 2 versions of this paper
Financial Globalization vs. Income Inequality: The Surprising Role of Delegated Portfolio Flows in Taming the Top 1%
Date Written: February 2021
Abstract
We document a surprising finding that foreign capital inflows delegated through global mutual funds reduce the income of the top 1%. To rationalize this observation, we utilize a comprehensive database of worldwide ownership of both private and public firms for 2001-2013, which allows us to trace income inequality to its micro-foundations of sales revenue accrued to rich families. We find that large delegated foreign inflows induce local rich families to sell concentrated yet profitable assets, consistent with a diversification channel for financial globalization to influence income inequality. Alternative mechanisms fail to explain these findings. Our results have important normative implications.
JEL Classification: D31, D63, G15, G23
Suggested Citation: Suggested Citation
Massimo Massa
INSEAD - Finance ( email )
Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)
Do you have a job opening that you would like to promote on SSRN?
Financial Globalization vs. Income Inequality: The Surprising Role of Delegated Portfolio Flows in Taming the Top 1%
This is a CEPR Discussion Paper. CEPR charges a fee of $8.00 for this paper.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.
