Publication:
Financial Openness, Democracy, and Redistributive Policy

Simple item page
dc.contributor.authorDailami, Monsoor
dc.date.accessioned2014-08-28T18:23:35Z
dc.date.available2014-08-28T18:23:35Z
dc.date.issued2000-06
dc.description.abstractThe debate about the relationship between democratic forms of government and the free movement of capital across borders dates to the 18th century. It has regained prominence as capital on a massive scale has become increasingly mobile and as free economies experience continuous pressure from rapidly changing technology, market integration, changing consumer preferences, and intensified competition. These changes imply greater uncertainty about citizens' future income positions, which could prompt them to seek insurance through the marketplace or through constitutionally arranged income redistribution. As more countries move toward democracy, the availability of such insurance mechanisms to citizens is key if political pressure for capital controls is to be averted and if public support for an open, liberal international financial order is to be maintained. The author briefly reviews how today's international financial system evolved from one of mostly closed capital accounts immediately after World War II to today's enormous, largely free-flowing market. Drawing on insights from the literature on public choice and constitutional political economy, the author develops an analytical framework for a welfare cost-benefit analysis of financial openness to international capital flows. The main welfare benefits of financial openness derive from greater economic efficiency and increased opportunities for risk diversification. The welfare costs relate to the cost of insurance used as a mechanism for coping with the risks of financial volatility. These insurance costs are the economic losses associated with redistribution, including moral hazard, rent-seeking, and rent-avoidance. A cross-sectional analysis of a large sample of developed and developing countries shows the positive correlation between democracy (as defined by political and civil liberty) and financial openness. More rigorous econometric investigation using logit analysis and controlling for level of income also shows that redistributive social policies are key in determining the likelihood that countries can successfully combine an openness to international capital mobility with democratic forms of government.en
dc.identifierhttp://documents.worldbank.org/curated/en/2000/06/437065/financial-openness-democracy-redistributive-policy
dc.identifier.doi10.1596/1813-9450-2372
dc.identifier.urihttps://hdl.handle.net/10986/19832
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 2372
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectAGGREGATE DEMAND
dc.subjectAGRICULTURE
dc.subjectASSET MANAGEMENT
dc.subjectAUTONOMY
dc.subjectBALANCE OF PAYMENTS
dc.subjectBANK LOANS
dc.subjectBANK RUN
dc.subjectBANKING REGULATION
dc.subjectBANKING SUPERVISION
dc.subjectBENEFIT ANALYSIS
dc.subjectBONDS
dc.subjectBORROWING
dc.subjectBORROWING COSTS
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL CONTROLS
dc.subjectCAPITAL FLIGHT
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL MARKETS
dc.subjectCAPITAL MOBILITY
dc.subjectCAPITALIZATION
dc.subjectCENTRAL BANK
dc.subjectCENTRAL BANK GOVERNORS
dc.subjectCHRONIC INFLATION
dc.subjectCIVIL SOCIETY
dc.subjectCONSOLIDATION
dc.subjectCONSUMER PREFERENCES
dc.subjectCORPORATE GOVERNANCE
dc.subjectCOST OF CAPITAL
dc.subjectCRITICAL SOCIAL
dc.subjectCURRENT ACCOUNT
dc.subjectDEBT
dc.subjectDEMOCRATIC INSTITUTIONS
dc.subjectDEMOCRATIC SOCIETIES
dc.subjectDEVELOPING COUNTRIES
dc.subjectECONOMIC ACTIVITY
dc.subjectECONOMIC CONDITIONS
dc.subjectECONOMIC EFFICIENCY
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC RESEARCH
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMPIRICAL ANALYSIS
dc.subjectEMPIRICAL EVIDENCE
dc.subjectEMPIRICAL RESEARCH
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATE ARRANGEMENTS
dc.subjectEXCHANGE RATE REGIME
dc.subjectEXCHANGE RATES
dc.subjectEXPORTS
dc.subjectEXTERNAL DEBT
dc.subjectFINANCIAL CRISES
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL ENVIRONMENT
dc.subjectFINANCIAL INNOVATION
dc.subjectFINANCIAL INSTITUTIONS
dc.subjectFINANCIAL INTEGRATION
dc.subjectFINANCIAL MARKET VOLATILITY
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL OPENNESS
dc.subjectFINANCIAL REGULATION
dc.subjectFINANCIAL RESOURCES
dc.subjectFINANCIAL SECTOR
dc.subjectFINANCIAL SERVICES
dc.subjectFINANCIAL STABILITY
dc.subjectFINANCIAL SYSTEM
dc.subjectFINANCIAL TRANSACTIONS
dc.subjectFINANCIAL VOLATILITY
dc.subjectFISCAL DEFICITS
dc.subjectFISCAL POLICY
dc.subjectFOREIGN ASSETS
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE MARKETS
dc.subjectFREE MARKETS
dc.subjectFULL EMPLOYMENT
dc.subjectGDP
dc.subjectGLOBALIZATION
dc.subjectGOVERNMENT EXPENDITURES
dc.subjectGOVERNMENT INTERVENTION
dc.subjectHUMAN CAPITAL
dc.subjectIMPORTS
dc.subjectINCOME
dc.subjectINDUSTRIAL COUNTRIES
dc.subjectINFLATION
dc.subjectINFLATION RATES
dc.subjectINSURANCE
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL BANKING
dc.subjectINTERNATIONAL FINANCIAL TRANSACTIONS
dc.subjectINTERNATIONAL POLICY COORDINATION
dc.subjectINTERNATIONAL TRADE
dc.subjectINVESTMENT OPPORTUNITIES
dc.subjectLIQUID ASSETS
dc.subjectLIQUIDITY
dc.subjectMACRO POLICY
dc.subjectMACROECONOMIC MANAGEMENT
dc.subjectMACROECONOMIC POLICY
dc.subjectMACROECONOMIC STABILITY
dc.subjectMACROECONOMIC STABILIZATION
dc.subjectMACROECONOMIC VARIABLES
dc.subjectMACROECONOMICS
dc.subjectMARGINAL COST
dc.subjectMARGINAL WELFARE COSTS
dc.subjectMARKET INTEGRATION
dc.subjectMARKET VALUE
dc.subjectMATURITIES
dc.subjectMONETARY AUTHORITIES
dc.subjectMONETARY POLICY
dc.subjectMORAL HAZARD
dc.subjectNATIONAL ECONOMIES
dc.subjectOIL
dc.subjectOIL PRICES
dc.subjectPAYMENT IMBALANCES
dc.subjectPER CAPITA INCOME
dc.subjectPOLICY RESEARCH
dc.subjectPOLITICAL ECONOMY
dc.subjectPORTFOLIO DIVERSIFICATION
dc.subjectPOVERTY ALLEVIATION
dc.subjectPOVERTY REDUCTION
dc.subjectPRICE STABILITY
dc.subjectPRIVATIZATION
dc.subjectPROPERTY RIGHTS
dc.subjectPUBLIC ENTERPRISES
dc.subjectPUBLIC EXPENDITURES
dc.subjectPUBLIC GOODS
dc.subjectREDISTRIBUTIVE TAXATION
dc.subjectREGULATORY RESPONSES
dc.subjectRENT SEEKING
dc.subjectRENT SEEKING BEHAVIOR
dc.subjectRISK AVERSE
dc.subjectRISK AVERSION
dc.subjectRISK DIVERSIFICATION
dc.subjectRISK PREMIA
dc.subjectSAVINGS
dc.subjectSECURITIES
dc.subjectSHORT-TERM TRANSACTIONS
dc.subjectSOCIAL COSTS
dc.subjectSOCIAL SECURITY
dc.subjectSOCIAL SERVICES
dc.subjectSTANDARD DEVIATION
dc.subjectSTOCK MARKETS
dc.subjectTRADE LIBERALIZATION
dc.subjectTRANSACTION COSTS
dc.subjectTRANSFER PAYMENTS
dc.subjectTRANSPARENCY
dc.subjectUNEMPLOYMENT
dc.subjectWEALTH
dc.subjectWELFARE ECONOMICS
dc.subjectWELFARE GAINS
dc.titleFinancial Openness, Democracy, and Redistributive Policyen
dspace.entity.typePublication
okr.crossref.titleFinancial Openness, Democracy, and Redistributive Policy
okr.date.disclosure2000-06-30
okr.date.doiregistration2025-04-10T09:17:22.669260Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2000/06/437065/financial-openness-democracy-redistributive-policy
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeFinance and Markets
okr.guid850601468740699823
okr.identifier.doi10.1596/1813-9450-2372
okr.identifier.externaldocumentum000094946_00072005324198
okr.identifier.internaldocumentum437065
okr.identifier.reportWPS2372
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/08/14/000094946_00072005324198/Rendered/PDF/multi_page.pdfen
okr.sectorCapital Markets Development
okr.sectorFinance
okr.topicEconomic Theory and Research
okr.topicBanks and Banking Reform
okr.topicFinance and Financial Sector Development::Financial Intermediation
okr.topicEnvironmental Economics and Policies
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.topicPayment Systems and Infrastructure
okr.topicFiscal and Monetary Policy
okr.unitGovernance, Regulation, and Finance, World Bank Institute
okr.volume1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
Files
Original bundle
Now showing 1 - 2 of 2
Thumbnail Image
Name:
multi_page.pdf
Size:
2.1 MB
Format:
Adobe Portable Document Format
Download
No Thumbnail Available
Name:
multi_page.txt
Size:
94.1 KB
Format:
Plain Text
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Plain Text
Description:
Download
Collections
Policy Research Working Papers