The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?
Author(s): Aarón Tornell and Andrés Velasco
Source: The Journal of Political Economy, Vol. 100, No. 6, Centennial Issue (Dec., 1992), pp.1208-1231
Abstract
We analyze a differential game in which all interest groups have access to a common capital stock. We show that the introduction of a technology that has inferior productivity but enjoys private access may ameliorate the tragedy of the commons. We use this model to analyze capital flight: in many poor countries, property rights are not well defined; since "safe" bank accounts in rich countries (the inferior technology) are available to citizens of these countries, they engage in capital flight. We show that the occurrence of capital flight does not imply that opening the capital account reduces growth and welfare.
International Trade, Distortions, and Long-Run Economic Growth
Author(s): Jong-Wha Lee
Source: Staff Papers - International Monetary Fund, Vol. 40, No. 2 (Jun., 1993), pp. 299-328
Abstract
The links between trade and growth are examined in a neoclassical model of an open economy in which domestic production requires both domestic and imported inputs. The model shows that trade distortions induced by policies such as tariffs and exchange controls generate cross-country divergences in growth rates and in per capita income over a long period. The empirical results confirm that tariff rates and black market premia, interacting with the estimated share of free trade imports, have significant negative effects on the growth rate of per capita income across countries.