Capital Flows to Developing Countries: The Allocation Puzzle

摘要: According to the consensus view in growth and development economics, cross country differences per-capita income largely reflect countries' total factor productivity. We argue that this has powerful implications for patterns of capital flows: everything else equal, countries with faster productivity should invest more, attract more foreign capital. then show pattern net flows across developing is not consistent prediction. If anything, seems flow grow less. result - which we call allocation puzzle constitutes an important challenge economic research, discuss some possible research avenues solve puzzle.