International capital market integration: Implications for convergence, growth, and welfare
AbstractThis paper studies the effects of international capital market integration on welfare and the speed of adjustment in a two-region endogenous growth model. Monopolistic firms undertake research and development (R&D) to improve their productivity level. National and international knowledge spillovers affect the returns to R&D. The two countries differ with respect to the initial productivity level and R&D capability (which is a proxy for human capital and structural policies). Long-run productivity gaps are determined by the difference in R&D capability. Over time, there is conditional convergence in productivity levels. The speed of convergence is larger with integrated international capital markets than without. Long-run gaps in consumption levels are larger in the former situation than in the latter. Capital market integration harms (benefits) the leading (lagging) region if domestic spillovers are more important than international spillovers and differences in R&D capabilities are small. Copyright Springer-Verlag Berlin Heidelberg 2004
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Bibliographic InfoArticle provided by Springer in its journal International Economics and Economic Policy.
Volume (Year): 1 (2004)
Issue (Month): 2 (January)
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Web page: http://www.springerlink.com/link.asp?id=111059
Rate of convergence; knowledge spillovers; endogenous growth; capital mobility; F12; F21; F43; O41;
Other versions of this item:
- Smulders, J.A., 2004. "International capital market integration: Implications for convergence, growth and welfare," Open Access publications from Tilburg University urn:nbn:nl:ui:12-143127, Tilburg University.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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