Net capital flows and productivty
Subtitle: evidence from U.S. states
By: Sebnem Kalemli-Ozcan ... [et al.].
Contributors: Kalemli-Ozcan, Sebnem.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11301; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11301.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Capital movements -- United States -- States.; Investments, Foreign -- United States -- States.; Wages and labor productivity -- United States -- States.; Industrial productivity -- United States -- States.
Description: "We study net capital flows between U.S. states.  We present a simple neoclassical model in which total factor productivity (TFP) varies across states and over time and where capital freely moves across state borders.  In this framework capital flows to states that experience a relative increase in TFP thus creating net cross-state capital ownership positions.  Net ownership positions converge to zero over time in the absence of further TFP movements.  While TFP can not be directly observed, we can identify states with high TFP growth as states with high output growth.  By comparing the level of personal income to output, we construct indicators of net capital flows into a state.  We then examine empirically if the level of net capital flows between states following relative movements in TFP corresponds to the predictions of the model and whether net ownership positions tend to converge to zero.  Our empirical results imply large flows of capital between states; for example, we find that a state with annual per capita output growth 1 percent higher than the average state over 10 years would attract capital in the amount of $9,900 per capita over those 10 years.  These magnitudes are in close agreement with the predictions of the model.  We conclude that frictions associated with borders are likely to be the main explanation for "low" international capital flows"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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