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Capital Flows to the New World as an Intergenerational Transfer

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Author Info
Alan M. Taylor
Jeffrey G. Williamson

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Abstract

Why 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Historical Working Papers with number 0032.

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Date of creation: Dec 1991
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Handle: RePEc:nbr:nberhi:0032

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Neal, Larry, 1985. "Integration of International Capital Markets: Quantitative Evidence from the Eighteenth to Twentieth Centuries," The Journal of Economic History, Cambridge University Press, vol. 45(02), pages 219-226, June. [Downloadable!]
  2. David, Paul A., 1977. "Invention and accumulation in america's economic growth: A nineteenth-century parable," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 6(1), pages 179-228, January. [Downloadable!] (restricted)
  3. McLean, I.W., 1991. "Saving in Settler Economies: Australian and North American Comparisons," Papers 91-7, University of Adelaide - Department of Economics.
  4. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-96, December. [Downloadable!] (restricted)
  5. Taylor, Alan M., 1992. "External Dependence, Demographic Burdens, and Argentine Economic Decline After the Belle ?poque," The Journal of Economic History, Cambridge University Press, vol. 52(04), pages 907-936, December. [Downloadable!]
  6. M.C. Urquhart, 1988. "Canadian Economic Growth 1870-1980," Working Papers 734, Queen's University, Department of Economics.
  7. Hammer, Jeffrey S., 1986. "Population growth and savings in LDCs: A survey article," World Development, Elsevier, vol. 14(5), pages 579-591, May. [Downloadable!] (restricted)
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