The Global Financial Resource Curse

Gianluca Benigno, Luca Fornaro and Martin Wolf

American Economic Review, 2025, vol. 115, issue 1, 220-62

Abstract: We provide a model connecting the global saving glut to productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for US nontradable goods, inducing a reallocation of US economic activity from the tradable sector to the nontradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth.

JEL-codes: E21 E22 E23 E44 F32 F43 O31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/aer.20211792

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