NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Dietrich Vollrath

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January 2009How Big are the Gains from International Financial Integration?
with Indrit Hoxha, Sebnem Kalemli-Ozcan: w14636
The literature has shown that the implied welfare gains from international financial integration are very small. We revisit the existing findings and document that welfare gains can be substantial if capital goods are not perfect substitutes. We use a model of optimal savings that includes a production function where the elasticity of substitution between capital varieties is less then infinity, but more than the value that would generate endogenous growth. This production structure is consistent with empirical estimates of the actual elasticity of substitution between capital types, as well as with the relatively slow speed of convergence documented in the growth literature. Calibrating the model, our results are that welfare gains from financial integration are equivalent to a 9% increas...

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

 
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