The Feldstein-Horioka puzzle and law
AbstractIn this paper, we introduce a proxy for the legal protection of investors, a dummy variable that indicates legal origins, into the Feldstein and Horioka (1980, Economic Journal 90) saving-investment regression. The estimations show that in the French-civil-law countries, which have the weakest investor protection, the domestic investment rates are generally less strongly correlated with the domestic saving rates. This implies that in countries with less investor protection, the capital resulting from an increase of domestic saving tends to flow to foreign countries with stronger investor protection, rather than into domestic investment.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 11 (2003)
Issue (Month): 1 ()
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- Martin Feldstein & Charles Horioka, 1979.
"Domestic Savings and International Capital Flows,"
NBER Working Papers
0310, National Bureau of Economic Research, Inc.
- Shleifer, Andrei & Wolfenzon, Daniel, 2002.
"Investor protection and equity markets,"
Journal of Financial Economics,
Elsevier, vol. 66(1), pages 3-27, October.
- Andrei Shleifer & Daniel Wolfenson, 2000. "Investor Protection and Equity Markets," Harvard Institute of Economic Research Working Papers 1906, Harvard - Institute of Economic Research.
- Andrei Shleifer & Daniel Wolfenson, 2000. "Investor Protection and Equity Markets," NBER Working Papers 7974, National Bureau of Economic Research, Inc.
- Chrysost Bangaké & Jude Eggoh, 2010. "International Capital Mobility in African Countries: Do the legal origins matter?," Economics Bulletin, AccessEcon, vol. 30(1), pages 73-83.
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