Relatore:
Enrico Spolaore
- Tufts University
mercoledì 31 marzo 2021
alle ore
16.00
Zoom webinar https://univr.zoom.us/j/89205652025
(by Bruno Pellegrino, Enrico Spolaore and Romain Wacziarg)
We quantify the impact of barriers to international investment, using a novel multi-country overlapping generations model with heterogeneous investors and imperfect capital mobility. Our model yields a gravity equation for foreign asset demand. We estimate this gravity equation using recently-developed foreign investment data that has been restated to account for the presence of offshore investment and financing vehicles. We show that a parsimonious implementation of the model with three barriers (geographic distance, cultural distance, and institutional distance) accounts for a large share of the observed variation in bilateral Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) positions. Our model predicts a significant home bias, higher rates of return on capital in emerging markets, as well as . In our benchmark calibration, we estimate that capital misallocation induced by these barriers significantly reduces World GDP compared to a situation without barriers. We also find that barriers to global capital allocation contribute significantly to cross-country inequality: the standard deviation of log capital per employee is 70% higher than it would be in a world without barriers to international investment, while the dispersion in output per employee is 40% higher.
