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The Global (Mis)Allocation of Capital

Author

Listed:
  • Bertaut, Carol
  • Curcuru, Stephanie E.
  • Faia, Ester
  • Gourinchas, Pierre-Olivier

Abstract

This paper studies the efficiency of international capital flows into and out of the U.S. using security-level equity holdings matched to firm-level measures of economic performance from 1995 to 2022. We find that both US and foreign investors tilt their international equity portfolio toward the top of the firm distributions of Total Factor Productivity (TFP), mark-ups, Marginal Revenue Product of Capital (MRPK) and intangible capital. This allocation to the top occurs primarily through a between-firm component. For US firms with high initial productivity, and for foreign firms with high MRPK, increases in international investors’ equity holdings are associated with higher future investment in the near term.

Suggested Citation

  • Bertaut, Carol & Curcuru, Stephanie E. & Faia, Ester & Gourinchas, Pierre-Olivier, 2025. "The Global (Mis)Allocation of Capital," CEPR Discussion Papers 20979, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20979
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    File URL: https://cepr.org/publications/DP20979
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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F3 - International Economics - - International Finance
    • F6 - International Economics - - Economic Impacts of Globalization

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