Why doesn't capital flow from rich to poor countries? An empirical investigation

Laura Alfaro () and Sebnem Kalemli-Ozcan ()

No 53, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We examine the role of dierent explanations for the lack of flows of capital from rich to poor countries−the Lucas paradox−in an empirical framework. Broadly speaking, the theoretical explanations for this paradox include dierences in fundamentals aecting the production structure versus international capital market imperfections. Our empirical evidence, based on cross-country regressions, shows that for the period 1971−1998, institutional quality is the most important causal variable explaining the Lucas paradox. Human capital and asymmetric information play a role as determinants of capital inflows but these variables cannot fully account for the paradox

Keywords: capital inflows; fundamentals; institutions; international capital market imperfections; neoclassical model (search for similar items in EconPapers)
JEL-codes: F21 F41 O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-dev, nep-ifn and nep-reg
Date: 2004
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Related works:
Working Paper: Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation (2005)
Working Paper: Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation (2003)
Journal Article: Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:red:sed004:53

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