Financial Integration, Technology Differences and Capital Flows

• Autores: Sebastián Claro
• Localización: Documentos de Trabajo ( Instituto de Economía PUC ), ISSN-e 0717-7593, Nº. 306, 2005
• Idioma: inglés
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• Resumen

  • The one-to-one mapping between cross-country di.erences in capital returns and the size and direction of international capital flows after financial integration vanishes in a multi-sector world with a laborintensive non-tradable sector if financial liberalization generates significant swings in the demand for the non-tradable good. For example, a high return to capital country may become an exporter of capital after financial integration if access to world capital markets enhances demand for the non-tradable good. Because domestic wages are determined by the competitiveness conditions in tradable industries, excess demand for labor created by the expansion of non-tradable demand is eliminated with capital outflows. These "non-standard" e.ects of financial integration on non-tradable demand are possible, for example, if financial liberalization a.ects the rate of productivity growth.