+1 862 207 3288 The essay question is:
Explain the ‘Lucas Paradox’ (Lucas, 1990). Critically evaluate the main explanations for this paradox.
I will add the essay requirement and lecture for ‘Lucas Paradox’ in the second step.
Indicative reading is given below.
Lucas Paradox:
Textbook: chapters 17 & 22 part 3
Alfaro, L., Kalemli-Ozcan, S. and Volosovych, V. (2008) ‘Why doesn’t capital
flow from rich to poor countries? An empirical investigation’, Review of
Economics and Statistics, Vol. 90 (2): 347-68.
Bryant, R. C. (2006) ‘Asymmetric demographic transitions and North-South
capital flows,’ Brookings Discussion Papers in International Economics, No.
170. Available at:
http://www.brookings.edu/papers/2006/05globaleconomics_bryant.aspx
Caselli, F. and Feyrer, J. (2007) ’The marginal product of capital’, Quarterly
Journal of Economics, Vol. 122 (2): 535-568.
Chatterjee, S. and Naknoi, K. (2010) ‘The marginal product of capital, capital
flows, and convergence,’ American Economic Review, Vol. 100(2): 73–77.
Clemen , M. A. (2002) Do Rich Countries invest less in poor countries than
the poor countries themselves? Centre for Global Development Working
Paper 19, December 2002. Available at:
http://www.cgdev.org/content/publications/detail/2771
Cohen, D and Soto, M. (2002) Why are poor countries poor? A message of
hope which involves the Resolution of a Becker/Lucas Paradox. OECD
Development Centre Technical Paper No. 197, available from:
http://www.oecd.org/dataoecd/8/42/1962709.pdf
Davies, D. (2002) Empirical Evidence on Human Capital Externalities.
Department of Economics, University of Western Ontario. Available at:
http://economics.uwo.ca/faculty/Davies/workingpapers/empiricalevidence.pd
f.
Ferreira, A. (2011) ‘On the Differences Between the Marginal Product of
Capital Across Countries’, Manchester School, Vol 79(3): 455
Goswami, M., J. Ree and I. Kota (2007) ‘Global capital flows: Defying gravity’
Finance and Development, Vol. 44
Gourinchas, P.-O. and Jeanne, O. (2007) Capital Flows to Developing
Countries: The Allocation Puzzle. National Bureau of Economic Research
Working Papers No. 13602. Available at:
http://www.iga.ucdavis.edu/Research/CEGE/cege-conference-
2008/Gourinchas%20paper.pdf
Ju, J. and Wei, S,J. (2006) A Solution to Two Paradoxes of International
Capital Flows. IMF Working Paper No. 06/178.
* Lucas, Robert E., Jr. (1990) ‘Why Doesn’t Capital Flow from Rich to Poor
Countries?’ American Economic Review, Vol. 80(2): 92-96
Prasad, E., Rajan, R. and Subramanian, A. (2007A) ‘Foreign capital and
economic growth’, Brookings Papers on Economic Activity, No 1: 153-209.
Prasad, E., Rajan, R. and Subramanian, A. (2007B) ‘The
Paradox of Capital’, Finance and Development, Vol. 44(1).
3
Available at:
http://www.imf.org/external/pubs/ft/fandd/2007/03/prasad.htm
Reinhart, C., and Rogoff, K., (2004) ‘Serial Default and the “Paradox” of Rich-Poor Capital Flows’, American Economic Review, 94 (2), 53-58.
Reinhart, C., Rogoff, K., and Savastano, M. (2003) ‘Debt Intolerance’, Brookings Papers on Economic Activity, 1: 1-62.
Sanchez, C. V (2006) The Direction of International Capital Flows: New Empirical Evidence. Available at:
http://rief.univ-paris1.fr/Rennes2007/20-Villegas.pdf
Snyder, T. J. (2013) ‘Increasing Returns, Institutions, and Capital Flows’, Eastern Economic Journal, Vol. 39: 285–308. Pdf on MOLE
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