Does Capital Scarcity Matter?

Anusha Chari, Peter Henry and Racha Moussa

No 23921, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper quantifies the welfare impact of a permanent increase in the level of per capita income brought about by a temporary increase in the growth rate of GDP per capita following capital account liberalization. In the immediate aftermath of liberalization, and under a range of assumptions, differences between the autarkic and integrated equilibrium consumption paths are large. Yet the welfare impact of these differences is small when using infinite horizon consumption streams to compute welfare gains. The results suggest that a finite horizon framework may be more appropriate and policy-relevant for evaluating the welfare consequences of economic policy changes that induce temporary growth effects but have a permanent impact on the level of per capita incomes.

JEL-codes: F21 F30 F43 F6 G15 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-fdg
Note: EFG IFM
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