Previous overall domain and to identify the scopes for

Previous and contemporary works with capital account liberalization and inequality of income and wealth have to be consulted to know the directions and patterns of existing knowledge, to locate my research in the overall domain and to identify the scopes for further research. In the last few years, the effect of CAL has been analyzed over the other macroeconomic indicators. In this endeavor, the primary focus of the capital account liberalization literatures has been economic growth. Very few papers such as paper that analyzes the distributional consequences of liberalization. Das and Mohapatra (2003) used aggregate data and found a positive effect of stock market liberalization on the share of income held by the top quintile of the income distribution. Other papers studied the broader link between financial deregulation and income inequality, with mixed results. Beck, Levine, and Levkov (2010) found that bank deregulation in the United States decreases inequality, whereas Jerzmanowski and Nabar (2013) found the opposite result. One of the significant research has been done by Mauricio Larrain (2015) where the author used aggregate data and exploited variation in the timing of capital account openings across 20 mainly European countries, he showed that opening the capital account increases aggregate wage inequality. In order to identify the mechanism, he used sectoral data and exploit variation in external financial dependence and capital-skill complementarity across industries. He also found that capital account opening increases sectoral wage inequality, particularly in industries with both high financial needs and strong complementarity. Efforts made by Kang-kook Lee and Arjun Jayadev (2005) to extend empirical studies by constructing a sophisticated capital account openness index and attempting to shed new light on the potential preconditions that might accelerate growth and they found little evidence that capital account liberalization could spur growth in cross-country regressions. Arjun Jayadev (2007) in his another paper on capital account openness and labor share of income made a plausible explanation that openness altered the conditions of bargaining between labor and capital since the bargaining strength of capital vis-a-vis labor increased, increased capital mobility raised rents accruing to capital. Thus, capital account openness might reduce labor’s share of income in the firm, and thereby, at an economy-wide level, its share of national output. However, there is still lack of focus towards developing countries where this could be a potential tool to accelerate or even contain the present economic growth rate. In this respect, this thesis contributes in the less discussed relationship between the capital account liberalization (CAL) and income inequality between skilled and unskilled labor classes based by using the data of the developing countries.