Profits, ‘Superstar’ Firms and Capital Flows

Lidia Smitkova

No 1030, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: In this paper, I study financial liberalization between economies with differing aggregate profit shares. I show that if firms compete oligopolistically, then economies which generate more very large — ‘superstar’ — firms enjoy higher aggregate profit shares. Embedding this setup in a two-country model with heterogeneous agents and non-homothetic saving behavior, I show that more profitable economies feature lower autarkic interest rate and experience capital outflows during financial liberalization. Calibrating the model to eight European economies, I show that the profit share gap can explain 29% of variation in the current account imbalances incurred between 1998 and 2019.

Date: 2023-12-20
New Economics Papers: this item is included in nep-eec, nep-eur and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:2c53a3ca-47dc-46b0-9c50-4e40e0fefe9e (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:1030

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).