Developing countries experience capital outflows due to investment risk and distortions.
High-growth countries with high investments often see money leaving their borders. This happens because of risks in individual investments and distortions in capital returns. A study of 67 countries from 1980 to 2003 found that countries with better productivity and more capital per worker tend to have more money leaving. The model used in the study accurately predicted these capital flows, especially in Asia where the capital distortions are lower.