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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

Abstract: 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)
Date: 2004-08-11
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Related works:
Journal Article: Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation (2008) Downloads
Working Paper: Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation (2005) Downloads
Working Paper: Why doesn't capital flow from rich to poor countries? An empirical investigation (2004)
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