Published in:University of Paris West EconomiX Working Paper ; No. 2008-27
Extent:
1 Online-Ressource (43 p)
Language:
English
DOI:
10.2139/ssrn.1639331
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 2010 erstellt
Description:
Paradoxically, high-investment and high-growth developing countries tend to experience capital outflows. This paper shows that this allocation puzzle can be explained simply by introducing uninsurable idiosyncratic investment risk in the neoclassical growth model. Using a sample of 67 countries between 1980 and 2003, we show that the model predicts accurately the allocation of capital flows in this sample. This is because the model accounts for two main facts: (i) TFP growth is positively correlated with capital outflows in a sample including creditor countries; (ii) the long-run level of capital per efficient unit of labor is positively correlated with capital outflows