American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Global Financial Resource Curse
American Economic Review
vol. 115,
no. 1, January 2025
(pp. 220–62)
Abstract
We provide a model connecting the global saving glut to productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for US nontradable goods, inducing a reallocation of US economic activity from the tradable sector to the nontradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth.Citation
Benigno, Gianluca, Luca Fornaro, and Martin Wolf. 2025. "The Global Financial Resource Curse." American Economic Review, 115 (1): 220–62. DOI: 10.1257/aer.20211792Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- E44 Financial Markets and the Macroeconomy
- F32 Current Account Adjustment; Short-term Capital Movements
- F43 Economic Growth of Open Economies
- O31 Innovation and Invention: Processes and Incentives