Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248426 
Year of Publication: 
2021
Series/Report no.: 
Economics Working Paper Series No. 21/365
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
Abstract: 
So-called "uphill capital flows", i.e. flows of physical capital from relatively poor to rich countries, are a new phenomenon with yet unclear impact. We develop a unified framework incorporating economic institutions, human capital and physical capital to study the interaction of international capital flows and growth. Analytically, we study conditions under which a positive change of a country's economic institutions can attract inflows of physical capital from abroad, leading to long-term growth via the accumulation of human capital. Our mechanism shows how a small initial difference in the level of institutions can lead to substantial divergence in income over time. We derive conditions under which a country receives inflows of capital over time and increases its investment in human capital. Finally, we provide simulations to illustrate our results.
Subjects: 
Growth
International Capital Flows
Inequality
Institutions
Human Capital
JEL: 
E02
F21
F43
O41
O43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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