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Organizational Capital and the International Co-movement of Investment

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  • Alok Johri
  • Marc-Andre Letendre
  • Daqing Luo

Abstract

A productivity shock leads to a large international transfer of capital and negative co-movement of investment in the typical two-country real business cycle model. Most recent models that attempt to reduce or remove this transfer produce unrealistically low investment volatility. We show that adding organizational capital to the technological environment of a relatively standard international business cycle model can ameliorate this problem. In addition we show that GHH preferences along with the above modification are sufficient to deliver positive cross-country correlations of consumption, hours, output and investment.

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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2010-05.

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Length: 43 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:mcm:deptwp:2010-05

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Keywords: International RBC; learning by doing; organizational capital; cross-country correlations; investment;

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Cited by:
  1. Alok Johri & Marc-Andre Letendre & Daqing Luo, 2010. "Organizational Capital and the International Co-movement of Investment," Department of Economics Working Papers 2010-05, McMaster University.
  2. Dmitriev, Alexandre & Roberts, Ivan, 2013. "The cost of adjustment: On comovement between the trade balance and the terms of trade," Economic Modelling, Elsevier, vol. 35(C), pages 689-700.
  3. Alok Johri & Bidyut Kumar Talukdar, 2011. "Organizational Capital and Optimal Ramsey Taxation," Department of Economics Working Papers 2011-09, McMaster University.

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