Template-Type: ReDIF-Paper 1.0
Author-Name:  Sebnem Kalemli-Ozcan
Author-X-Name-First: Sebnem 
Author-X-Name-Last: Kalemli-Ozcan
Author-Workplace-Name: Department of Economics, University of Houston
Author-Email:sebnem.kalemli-ozcan@mail.uh.edu
Author-Name:  Bent E. Sørensen
Author-X-Name-First: Bent 
Author-X-Name-Last: Sørensen
Author-Email:  bent.sorensen@mail.uh.edu
Author-Workplace-Name: Department of Economics, University of Houston
Author-Name:  Ariell Reshef	
Author-X-Name-First: Ariell 
Author-X-Name-Last: Reshef
Author-Workplace-Name: New York University
Author-Email: 
Author-Name:  Oved Yosha	
Author-X-Name-First: Oved
Author-X-Name-Last: Yosha
Author-Workplace-Name: 
Author-Email: 
Title: Why Does Capital Flow to Rich States?
Abstract: We study the determinants of net capital income flows within the United States. We analyze
a simple multi-state neoclassical model in which total factor productivity varies across states
and over time and capital flows freely across state borders. The model predicts that capital will
flow to states with relatively high output growth. Since relative growth patterns are persistent
such states are also high output states, which implies that high output will be associated with
inflows of capital and net outflows of capital income. Our empirical findings correspond well
to the predictions of the model and indicate persistent net capital income flows and net cross-
state investment positions between states which are an order of magnitude larger than observed
capital income flows between countries. Thus, our results imply that frictions associated with
national borders are likely to be the main explanation for "low" international capital flows.
Length:  53 pages
Creation-Date:  2005-04
File-URL: http://www.uh.edu/econpapers/RePEc/hou/wpaper/2005-04.pdf
File-Format: Application/pdf
Number: 2005-04
Classification-JEL: F21, F41
Keywords: capital flows, ownership, net factor income, historical income
Handle: RePEc:hou:wpaper:2005-04