Capital Flows to the New World as an Intergenerational Transfer
AbstractWhy did international capital flows rise to such heights in the late 19th century, the years between 1907 and 1913 in particular? Britain placed half of her annual savings abroad during those seven years, and 76 percent of it went to the New World countries of Canada, Australia, the USA, Argentina and the rest of Latin America. The resource abundant New World was endowed with dual scarcity, labor and capital. The labor supply response to labor scarcity took the form of both immigration and high fertility. This served to create much higher child dependency burdens in the New World than in the Old. Econometric analysis shows that these dependency burdens served to choke off domestic savings in the New World, thus creating an external demand for savings. The influence was very large. Indeed, it appears that the vast majority of those international capital flows from Old World to New can be explained by those dependency rate gaps. As a consequence, it is appropriate to view those large international capital flows as an intergenerational transfer.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Historical Working Papers with number 0032.
Date of creation: Dec 1991
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Publication status: published as Journal of Political Economy, Volume 102, No.2 (April 1994), pp.348-71
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Other versions of this item:
- Taylor, Alan M & Williamson, Jeffrey G, 1994. "Capital Flows to the New World as an Intergenerational Transfer," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 348-71, April.
- Taylor, A.M., 1991. "Capital Flows to the New World as an Intergenerational Transfer," Harvard Institute of Economic Research Working Papers 1579, Harvard - Institute of Economic Research.
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