Economics, Econometrics and Finance
5 years ago

Technological specialization drives international capital flows, reshaping global economies.

SSRN Electronic Journal
The Capital Matthew Effect
Dan Su

Paper Summary

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Technological specialization drives international capital flows. Countries with capital shortages tend to adopt capital-saving technology, affecting capital returns. Capital-rich nations import capital from capital-poor ones with different technology preferences, creating a capital Matthew effect. This new perspective helps explain global finance puzzles like the Lucas paradox and global imbalances. Empirical evidence supports this model.