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The Feldstein-Horioka puzzle and law

Author

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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
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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. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    3. 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. 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.
    2. 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.

    More about this item

    JEL classification:

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

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