Higher capital controls in under-developed countries can induce balanced growth.
Capital controls can impact economic growth differently depending on the country's development level. In under-developed countries, higher capital controls can lead to balanced growth by making it easier for workers to invest in education. This can help create a modern sector in the economy. However, in more developed countries, capital controls may hinder growth by limiting the ability to tax capitalists. Financial liberalization tends to boost growth, especially in countries with higher education levels.