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Technology Differences and Capital Flows
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Abstract
The one-to-one mapping between cross-country differences in capital returns and the direction of international capital flows is broken in a multisector world where international factor price differences are driven by technology differences. A technology-backward or low-return-to-capital country will face capital inflows or outflows after financial integration depending on whether non-tradable demand is bossted or notTEchnology Differences, Capital Flows, International Factor Price Differences