Year of Graduation
Capital Outflows and Welfare in Developing Countries
The present study models capital outflow as an outcome of game interactions of powerful groups in a country. As a result, capital outflow is characterized as a function of three variables: profitability of an economy, quality of institutions and the extent of political competition. The outflow is positively depended from profitability of an economy and negatively from institutions quality. The influence of political competition is ambiguous. In a country with bad institutions political competition leads to capital outflow, but in a country with good institutions it leads to larger capital inflows. Further, the paper has an empirical supplement, which partly demonstrates the fairness of theoretical model deductions for a sample of 87 developing countries.