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Capital Flows to the New World as an Intergenerational Transfer

  • Taylor, A.M.

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 Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1579.

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Length: 39 pages
Date of creation: 1991
Date of revision:
Handle: RePEc:fth:harver:1579
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  1. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-96, December.
  2. 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.
  3. Ronald D Lee & Andrew Mason & Tim Miller, 1998. "Saving, Wealth, and Population," Working Papers 199805, University of Hawaii at Manoa, Department of Economics.
  4. Hammer, Jeffrey S., 1986. "Population growth and savings in LDCs: A survey article," World Development, Elsevier, vol. 14(5), pages 579-591, May.
  5. M.C. Urquhart, 1988. "Canadian Economic Growth 1870-1980," Working Papers 734, Queen's University, Department of Economics.
  6. 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.
  7. McLean Ian W., 1994. "Saving in Settler Economies: Australian and North American Comparisons," Explorations in Economic History, Elsevier, vol. 31(4), pages 432-452, October.
  8. C.B. Schedvin, 1990. "Staples and regions of Pax Britannica," Economic History Review, Economic History Society, vol. 43(4), pages 533-559, November.
  9. Williamson,Jeffrey G., 1990. "Coping with City Growth during the British Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521364805, October.
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