Institutional Quality, Captal Flight and Capital Flows

Seung-Gwang Baek and Doo Yong Yang
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Seung-Gwang Baek: Hongik University

Korean Economic Review, 2010, vol. 26, 121-155

Abstract: This paper examines the determinants of capital flight using panel data for 53 developing and 21 developed countries from 1984-2004. Our empirical results show, first, that institutional quality is a key determinant of capital flight for developing countries. Second, capital control is not an effective tool to mitigate flight of capital. Capital flees less to the extent that a country is financially more open and more developed. Third, capital flight increases with the standard of living up to a certain level of income, but thereafter decreases as income rises. Finally, upgrading institutional quality not only encourages private capital inflows but also discourages capital flight.

Keywords: Capital flight; political risk; institutional quality (search for similar items in EconPapers)
JEL-codes: F32 F34 O11 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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