Why does not capital frlow from rich to poor countries? An Empirical investigation
Laura Alfaro () and
Sebnem Kalemli-Ozcan ()
No 416, Econometric Society 2004 North American Summer Meetings from Econometric Society
We examine the role of different 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 differences in fundamentals affecting the production structure versus international capital market imperfections. Our cross-country regressions show 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 flows; Lucas paradox; fundamentals; market imperfections (search for similar items in EconPapers)
JEL-codes: F21 F41 O21 (search for similar items in EconPapers)
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Journal Article: Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation (2008)
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 (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:nasm04:416
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