Capital Flows and Endogenous Growth

Evgenij Komarov ()
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Evgenij Komarov: Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland

No 21/365, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: So-called "capital flows", i.e. of physical capital from relatively poor to rich countries, are a new phenomenon with yet unclear impact. We develop a unified framework incorporating economic institutions, human capital and physical capital to study the interaction of international capital ows and growth. Analytically, we study conditions under which a positive change of a country's economic institutions can attract inflows of physical capital from abroad, leading to long-term growth via the accumulation of human capital. Our mechanism shows how a small initial difference in the level of institutions can lead to substantial divergence in income over time. We derive conditions under which a country receives in flows of capital over time and increases its investment in human capital. Finally, we provide simulations to illustrate our results.

Keywords: Growth; International Capital Flows; Inequality; Institutions; Human Capital (search for similar items in EconPapers)
JEL-codes: E02 F21 F43 O41 O43 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-11
New Economics Papers: this item is included in nep-gro and nep-mac
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