Why doesn't capital flow from rich to poor countries
Subtitle: an empirical investigation
By: Laura Alfaro, Sebnem Kalemli-Ozcan, Vadym Volosovych
Contributors: Kalemli-Ozcan, Sebnem; Volosovych, Vadym; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- Paper# 04-040; Working paper (Harvard Business School. Division of Research) -- 04-040
Publisher: Division of Research, Harvard Business School
Published: 2004
Place of publication: Boston
Language: eng
Number of pages: 46
Description: 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 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 do play a role as determinants of capital inflows but these variables cannot fully account for the paradox.
Notes: "December 2003"--Added t.p.

Includes bibliographical references.