International Saving, Investment and Trade

Posted: 21 Jul 1998

See all articles by Peter Marcel Debaere

Peter Marcel Debaere

University of Virginia - Darden School of Business; Centre for Economic Policy Research (CEPR)

Ufuk Demiroglu

University of Michigan

Date Written: 1997

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 in 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.

JEL Classification: F11, O16

Suggested Citation

Debaere, Peter Marcel and Demiroglu, Ufuk, International Saving, Investment and Trade (1997). Available at SSRN: https://ssrn.com/abstract=43660

Peter Marcel Debaere

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/html/direc_detail.aspx?styleid=2&id=5794

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ufuk Demiroglu (Contact Author)

University of Michigan ( email )

611 Tappan Street
102 Lorch Hall
Ann Arbor, MI 48109-1220
United States
313-764-2355 (Phone)
313-764-2769 (Fax)

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