Capital controls and the location of industry

Magnus Wiberg

The World Economy, 2020, vol. 43, issue 4, 871-891

Abstract: This paper studies capital controls on the outflow of capital in a two‐region new economic geography model. Capital controls are set in a non‐cooperative or cooperative manner by social planners. Capital controls are relatively higher in the North in the non‐cooperative equilibrium. This leads to relatively more firms located in the region where more consumers reside under the non‐cooperative equilibrium. The locational bias towards the North in the non‐cooperative equilibrium becomes larger as trade barriers are reduced. That is, firms locate to the North at a relatively higher rate in the non‐cooperative equilibrium as trade is liberalised. Contrary to previous findings, it follows that global welfare is relatively higher in the non‐cooperative equilibrium, although the social planner sets capital controls by maximising joint regional welfare in the cooperative equilibrium.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/twec.12908

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:bla:worlde:v:43:y:2020:i:4:p:871-891

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().