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Where does Capital Flow? A Comparison of U.S. States and EU Countries 1950-2000

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  • Sebnem Kalemli-Ozcan
  • Bent E. Sorensen
  • Belgi Turan

Abstract

We find that the United States in the 1950s and 1960s was characterized by strong "catch-up growth" in the south with capital owing from rich northern states to poorer southern states - consistent with the predictions of the simple neoclassical model. After the 1970s, "catch-up growth" is mainly over in the United States and capital is owing to productive (rich) states. For Europe, we find that capital has been owing from the richer countries to the poorer countries since the 1970s with no signs yet of the "catch-up" phase having run its course, except for the country of Ireland.

Suggested Citation

  • Sebnem Kalemli-Ozcan & Bent E. Sorensen & Belgi Turan, 2007. "Where does Capital Flow? A Comparison of U.S. States and EU Countries 1950-2000," European Economy - Economic Papers 2008 - 2015 295, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0295
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    1. Herrmann, Sabine & Kleinert, Jörn, 2014. "Lucas paradox and allocation puzzle: Is the euro area different?," Discussion Papers 06/2014, Deutsche Bundesbank.
    2. Claudia M. Buch, 2013. "From the Stability Pact to ESM - What Next?," Chapters, in: Andreas Dombret & Otto Lucius (ed.), Stability of the Financial System, chapter 5, Edward Elgar Publishing.

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