International Saving, Investment and Trade

P. Debaere and Ufuk Demiroglu

Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: Feldstein and Horioka (1980) observed that saving and investment move closely together in the major OECD countries. This finding is a puzzle if national economies are characterized by one sector production functions of the form F(K,L). In that case, in a high saving country, the high rate of investment and capital accumulation would result in a decline of the marginal product of capital, leading to an incentive for exporting capital. In this paper, we show that this incentive disappears in a multi-sector world. National capital can be absorbed domestically without a decline in its marginal product through a shift in the sectoral composition of national production towards capital intensive sectors.

Keywords: INVESTMENTS; SAVINGS (search for similar items in EconPapers)
JEL-codes: F11 O16 (search for similar items in EconPapers)
Pages: 18 pages
Date: 1997
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Citations: View citations in EconPapers (2)

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Journal Article: International Saving, Investment and Trade (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:406

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