Should capital flow from rich to poor Countries?
Monge-Naranjo, Alejandro (Washington University in St. Louis)
Sánchez, Juan M. (Washington University in St. Louis)
Santaeulàlia-Llopis, Raül (Barcelona Graduate School of Mathematics (BGSMath))
Sohail, Faisal (University of Melbourne)

Date:	2019
Abstract:	Are human and physical capital stocks allocated efficiently across countries? To answer this question, we need to differentiate misallocation from factor intensity differences. We use newly available estimates on factor shares from Monge-Naranjo, Santaeulàlia-Llopis, and Sánchez (2019) to correctly measure the factor shares of physical and human capital for a large number of countries and periods. We find that the global efficiency losses of the misallocation of human capital are much more substantial than those of physical capital, amounting to 40 percent of the world's output. Moreover, contrary to the findings of Monge-Naranjo, Santaeulàlia-Llopis, and Sánchez (2019) for physical capital, the global misallocation of human capital does not seem to be subsiding. We argue that the proper measure of global misallocation requires considering the potential gains of reallocating both physical and human capital. In this case, the implied efficiency loses from misallocation are up to 60 percent of global output. Attaining those gains, contrary to the prominent Lucas paradox (Lucas, 1990), would often require physical capital to flow from poor to rich countries.
Grants:	European Commission 324048 Ministerio de Economía y Competitividad SEV-2015-0563
Note:	Alexander Monge-Naranjo is an economist and research officer at Federal Reserve Bank of St. Louis and a visiting associate professor at Washington University in St. Louis. Juan M. Sánchez is an economist and assistant vice president at the Federal Reserve Bank of St. Louis and an adjunct lecturer at Washington University in St. Louis. Raül Santaeulàlia-Llopis is a research fellow at Markets, Organizations and Votes in Economics (MOVE), an associate professor of economics at the Autonomous University of Barcelona, and an affiliated research professor at the Barcelona Graduate School of Economics. Faisal Sohail is an assistant professor of economics at the University of Melbourne and was a technical research associate at the Federal Reserve Bank of St. Louis. Raül Santaeulàlia-Llopis thanks the European Research Council (ERC Advanced Grant GA324048 Asset Prices and Macro Policy when Agents Learn [APMPAL]) and the Spanish Ministry of Economy and Competitiveness through the Severo Ochoa Programme for Centers of Excellence in R&D (SEV-2015-0563) for financial support. The authors thank Oksana Leukhina for comments and suggestions and Juan Vizcaino and Qiuhan Sun for research assistance.
Note:	Altres ajuts: NCEEER
Rights:	Tots els drets reservats.
Language:	Anglès
Document:	Article ; recerca ; Versió publicada
Published in:	Review. Federal Reserve Bank of St. Louis, Vol. 101 Núm. 4 (2019) , p. 277-295, ISSN 0014-9187

DOI: 10.20955/r.101.277-95

20 p, 1.2 MB

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