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The Feldstein-Horioka puzzle and law

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  • Hiroshi Gunji

    (Japan Society for the Promotion of Science)

Abstract

In this paper, we introduce a proxy for the legal protection of investors, a dummy variable that indicates legal origins, into the Feldstein and Horioka (1980, Economic Journal 90) saving-investment regression. The estimations show that in the French-civil-law countries, which have the weakest investor protection, the domestic investment rates are generally less strongly correlated with the domestic saving rates. This implies that in countries with less investor protection, the capital resulting from an increase of domestic saving tends to flow to foreign countries with stronger investor protection, rather than into domestic investment.

Suggested Citation

  • Hiroshi Gunji, 2003. "The Feldstein-Horioka puzzle and law," Economics Bulletin, AccessEcon, vol. 11(1), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-03k00001
    as

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    File URL: http://www.accessecon.com/pubs/EB/2003/Volume11/EB-03K00001A.pdf
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    References listed on IDEAS

    as
    1. Shleifer, Andrei & Wolfenzon, Daniel, 2002. "Investor protection and equity markets," Journal of Financial Economics, Elsevier, vol. 66(1), pages 3-27, October.
    2. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    3. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    4. Martin Feldstein & Philippe Bacchetta, 1991. "National Saving and International Investment," NBER Chapters, in: National Saving and Economic Performance, pages 201-226, National Bureau of Economic Research, Inc.
    5. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
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    Cited by:

    1. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.
    2. Onur ÖZDEMIR, 2022. "High-Income Countries and Feldstein-Horioka Puzzle: Econometric Evidence from Dynamic Common-Correlated Effects Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 45-67, April.
    3. Chrysost Bangaké & Jude Eggoh, 2010. "International Capital Mobility in African Countries: Do the legal origins matter?," Economics Bulletin, AccessEcon, vol. 30(1), pages 73-83.
    4. repec:ebl:ecbull:v:30:y:2010:i:1:p:73-83 is not listed on IDEAS

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    More about this item

    JEL classification:

    • K0 - Law and Economics - - General
    • F3 - International Economics - - International Finance

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