Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007

Lee Ohanian, Paulina Restrepo-Echavarria and Mark Wright

No 2014-38, Working Papers from Federal Reserve Bank of St. Louis

Abstract: After World War II, international capital flowed into slow-growing Latin America rather than fast-growing Asia. This is surprising as, everything else equal, fast growth should imply high capital returns. This paper develops a capital flow accounting framework to quantify the role of different factor market distortions in producing these patterns. Surprisingly, we find that distortions in labor markets ? rather than domestic or international capital markets ? account for the bulk of these flows. Labor market distortions that indirectly depress investment incentives by lowering equilibrium labor supply explain two-thirds of observed flows, while their removal accounts for much of Asia?s growth.

Keywords: Capital Flows; Labor Markets; Domestic Capital Markets; International Capital Markets (search for similar items in EconPapers)
JEL-codes: F41 F42 F43 F44 (search for similar items in EconPapers)
Pages: 113 pages
Date: 2013-11-25
New Economics Papers: this item is included in nep-his, nep-lam, nep-opm and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2014/2014-038.pdf Full text (application/pdf)

Related works:
Working Paper: Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007 (2015)
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:fip:fedlwp:2014-038

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2014.038

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().