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UID:b3b4b00100c2dd1bcc140d1e174c781a
CATEGORIES:Seminars
CREATED:20190121T104343
SUMMARY:Lunch Seminar: Robert S. Chirinko - University of Illinois at Chicago
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:\n\nInternational Capital Allocations: The Lucas Paradox and other Puzzles 
 with Debdulal Mallick\nAbstract:\n"Why Doesn’t Capital Flow from Rich to Po
 or Countries?” This provocative question posed by Lucas in 1990 initiated a
  line of research focusing on the substantial differences in the marginal p
 roduct of private capital (MPK) across countries. Large and sustained diffe
 rences in MPKs between poor and rich countries define the Lucas Paradox, wh
 ich is sharply at odds with capital’s pursuit of profitable investment oppo
 rtunities and diminishing returns to capital accumulation that are at the c
 ore of the neoclassical framework. Subsequent studies with improved measure
 ment have largely resolved the Lucas Paradox. This paper re-examines this e
 vidence with new data, enhanced measurement, and a more nuanced definition 
 of convergence. We begin by showing that the Lucas Paradox has reemerged wi
 th the most recently available data. Moreover, the difference between the M
 PK’s for rich and poor countries is widened when adjustments are made for t
 he shadow economy and government capital. A new puzzle emerges, as there is
  a clear structural break in 1990, after which the MPK’s for both rich and 
 poor countries rise. Such an increase is at odds with the global saving glu
 t and secular stagnation. We then argue, however, that a comparison of aver
 age MPK’s is not appropriate for evaluating the efficiency of international
  capital allocations because they are sensitive to transition dynamics and 
 country-specific steady-states. These problems are addressed in a partial a
 djustment model. Conditional on these steady-states, international capital 
 allocations are reassessed. The steady-state MPK’s are related to instituti
 onal infrastructure and finance constraints. Counterfactual exercises gauge
  the impact of international capital misallocations on world output.\n\n
DTSTAMP:20260403T183202Z
DTSTART:20190417T130000Z
DTEND:20190417T140000Z
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