Author(s):
Sergio de Ferra, Kurt Mitman and Federica Romei
Date:
January 2021
Abstract:
Capital flows from equal to unequal countries. We document this empirical regularity in a large sample of advanced economies. The capital flows are largely driven by private savings. We propose a theory that can rationalize these findings: more unequal countries endogenously develop deeper financial markets. Households in unequal counties, in turn, borrow more, driving the observed direction of capital flows.
Link: Why Does Capital Flow from Equal to Unequal Countries?