The Impact of Financial Constraints and Wealth Inequality on International Trade Flows, Capital Movements and Entrepreneurial Migration

35 Pages Posted: 22 May 2014

See all articles by Spiros Bougheas

Spiros Bougheas

University of Nottingham - School of Economics

Rod Falvey

Bond University - Department of Economics

Date Written: April 21, 2014

Abstract

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

Bougheas, Spiros and Falvey, Rod, The Impact of Financial Constraints and Wealth Inequality on International Trade Flows, Capital Movements and Entrepreneurial Migration (April 21, 2014). CESifo Working Paper Series No. 4775. Available at SSRN: https://ssrn.com/abstract=2439613

Spiros Bougheas (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Rod Falvey

Bond University - Department of Economics ( email )

Bond University - Department of Economics
Gold Coast, Queensland 4229
Australia

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