The Impact of Financial Constraints and Wealth Inequality on International Trade Flows, Capital Movements and Entrepreneurial Migration
35 Pages Posted: 22 May 2014
Date Written: April 21, 2014
We introduce financial frictions into a simple two sector model of international trade with heterogeneous agents and investigate the impact of differences in the strength of financial institutions and wealth inequality on trade flows, capital movements and entrepreneurial migration. Distinct cost-cutting and career-changing motives for entrepreneurial migration exist, which can lead to two-way entrepreneurial flows. We establish presumptions that countries with stronger financial systems or greater wealth inequality will export the output of the financially dependent sector, will import capital and will be a (net) exporter of entrepreneurs. Important exceptions are shown.
Keywords: entrepreneurial migration, trade flows, capital flows, wealth inequality, financial frictions.
JEL Classification: F210, G150
Suggested Citation: Suggested Citation