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International capital market integration: Implications for convergence, growth and welfare

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  • Smulders, J.A.

    (Tilburg University)

Abstract

This paper studies the effects of international capital market integration on welfare and the speed of adjustment in a two-region endogenous growth model. Monopolistic firms undertake research and development (R&D) to improve their productivity level. National and international knowledge spillovers affect the returns to R&D. The two countries differ with respect to the initial productivity level and R&D capability (which is a proxy for human capital and structural policies). Long-run productivity gaps are determined by the difference in R&D capability. Over time, there is conditional convergence in productivity levels. The speed of convergence is larger with integrated international capital markets than without. Long-run gaps in consumption levels are larger in the former situation than in the latter. Capital market integration harms (benefits) the leading (lagging) region if domestic spillovers are more important than international spillovers and differences in R&D capabilities are small. Copyright Springer-Verlag Berlin Heidelberg 2004

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-143127.

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Date of creation: 2004
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Publication status: Published in International Economics and Economic Policy (2004) v.1, p.173-194
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-143127

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Web page: http://www.tilburguniversity.edu/

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Cited by:
  1. Hartmut Egger & Peter Egger & Josef Falkinger & Volker Grossmann, 2005. "International Capital Market Integration, Educational Choice and Economic Growth," CESifo Working Paper Series 1630, CESifo Group Munich.
  2. Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, vol. 4(1), pages 61-100, April.
  3. Eleonora Cavallaro & Marcella Mulino, 2008. "Vertical Innovation and Catching-Up: Implications of EU Integration for CEECs-5," International Advances in Economic Research, Springer, vol. 14(3), pages 265-279, August.
  4. Simone Valente, 2006. "Trade, Envy and Growth: International Status Seeking in a Two-Country World," CER-ETH Economics working paper series 06/53, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. Simone Valente, 2007. "International Status Seeking, Trade, and Growth Leadership," CER-ETH Economics working paper series 07/75, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  6. Eleonora Cavallaro & Piero Esposito & Alessia Matano & Marcella Mulino, 2012. "Technological catching up, quality of exports and competitiveness: a sectoral perspective," Working Papers 158, University of Rome La Sapienza, Department of Public Economics.
  7. Cavallaro, Eleonora & Mulino, Marcella, 2008. "Technological diffusion and dynamic gains from trade," MPRA Paper 13793, University Library of Munich, Germany.

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