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International capital market integration: Implications for convergence, growth, and welfare

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  • Sjak Smulders

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Abstract

This 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 Info

Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 1 (2004)
Issue (Month): 2 (January)
Pages: 173-194

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Handle: RePEc:kap:iecepo:v:1:y:2004:i:2:p:173-194

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Web page: http://www.springerlink.com/link.asp?id=111059

Related research

Keywords: Rate of convergence; knowledge spillovers; endogenous growth; capital mobility; F12; F21; F43; O41;

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Cited by:
  1. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2005. "International Capital Market Integration, Educational Choice and Economic Growth," CESifo Working Paper Series 1630, CESifo Group Munich.
  2. Simone Valente, 2007. "International Status Seeking, Trade, and Growth Leadership," CER-ETH Economics working paper series 07/75, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  3. Cavallaro, Eleonora & Mulino, Marcella, 2008. "Technological diffusion and dynamic gains from trade," MPRA Paper 13793, University Library of Munich, Germany.
  4. Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, Springer, vol. 4(1), pages 61-100, April.
  5. Simone Valente, 2006. "Trade, Envy and Growth: International Status Seeking in a Two-Country World," CER-ETH Economics working paper series 06/53, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  6. Eleonora Cavallaro & Piero Esposito & Alessia Matano & Marcella Mulino, 2013. "Technological Catching Up, Quality of Exports, and Competitiveness: A Sectoral Perspective," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 49(6), pages 4-21, November.
  7. Eleonora Cavallaro & Marcella Mulino, 2008. "Vertical Innovation and Catching-Up: Implications of EU Integration for CEECs-5," International Advances in Economic Research, Springer, Springer, vol. 14(3), pages 265-279, August.

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