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International Saving, Investment and Trade

Author

Listed:
  • Debaere, P.
  • Demiroglu, U.

Abstract

Feldstein and Horioka (1980) observed that saving and investment move closely together in the major OECD countries. This finding is a puzzle if national economies are characterized by one sector production functions of the form F(K,L). In that case, in a high saving country, the high rate of investment and capital accumulation would result in a decline of the marginal product of capital, leading to an incentive for exporting capital. In this paper, we show that this incentive disappears in a multi-sector world. National capital can be absorbed domestically without a decline in its marginal product through a shift in the sectoral composition of national production towards capital intensive sectors.

Suggested Citation

  • Debaere, P. & Demiroglu, U., 1997. "International Saving, Investment and Trade," Working Papers 406, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:406
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    Cited by:

    1. João Sousa Andrade, 2006. "Mobilidade do Capital e Sustentabilidade Externa: uma aplicação da tese de F-H a Portugal (1910-2004)," GEMF Working Papers 2006-04, GEMF, Faculty of Economics, University of Coimbra.
    2. João Sousa Andrade, 2007. "La these de Feldstein-Horioka: une mesure de la mobilité internationale du capital," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 54(1), pages 53-67, March.

    More about this item

    Keywords

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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