International Saving, Investment and Trade
AbstractFeldstein and Horioka (1980) observed that saving and investment move closely together in the major OECD countries. This finding is a puzzle if national economies are characterized by one sector production functions of the form F(K,L). In that case, in a high saving country, the high rate of investment and capital accumulation would result in a decline of the marginal product of capital, leading to an incentive for exporting capital. In this paper, we show that this incentive disappears in a multi-sector world. National capital can be absorbed domestically without a decline in its marginal product through a shift in the sectoral composition of national production towards capital intensive sectors.
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 19 (2008)
Issue (Month): 5 (November)
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Web page: http://www.springerlink.com/link.asp?id=100323
Investment; Savings; OECD; Capital; Heckscher-Ohlin; International capital mobility; F1; F2;
Other versions of this item:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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