The (Much Understated) Quantitative Role of Capital Accumulation and Saving

Macroeconomics from University Library of Munich, Germany

Abstract: Can factor accumulation still help us understand differences in capital inflows and income across countries? This paper offers a quantitative evaluation of neoclassical models of growth with collateral constraints. Previous work has found evidence that supports the qualitative predictions of this class of models for the direction of capital flows - -- they are driven by domestic scarcity --- and the role of domestic savings --- they act as complements rather than substitutes to capital inflows. In this paper, I estimate the factor shares implied by the long-term dynamics of external debt observed in the data. I find that a model with constant-elasticity-of substitution technology and a collateral constraint can generate plausible capital shares and cross- country distributions of debt-to-GDP ratios. This suggests that capital accumulation may play a more important role than suggested by the recent literature on growth, even in a world with limited financial integration.

Keywords: Credit constraints; net external debt; capital flows; savings; convergence; capital shares. (search for similar items in EconPapers)
JEL-codes: C63 F41 F43 O41 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2005-07-14
New Economics Papers: this item is included in nep-dev and nep-fmk
Note: Type of Document - pdf; pages: 50
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0507015

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