Inequality, Foreign Investment, and Imperialism

Stone Center Working Paper, 2017

53 Pages Posted: 21 Dec 2017

See all articles by Thomas Hauner

Thomas Hauner

CUNY - The Graduate Center

Branko Milanovic

World Bank - Development Research Group (DECRG); University of Maryland

Suresh Naidu

Columbia University

Date Written: November 30, 2017


We present an empirical restatement of the classical economic theory of imperialism and the origins of World War I. Using recent data, we show 1) inequality was at historical highs in all the advanced belligerent countries at the turn of the century, 2) rich wealth holders invested more of their assets abroad, 3) risk-adjusted foreign returns were higher than riskadjusted domestic returns, 4) establishing direct political control decreased the riskiness of foreign assets, 5) increased inequality was associated with higher share of foreign assets in GDP, and 6) increased share of foreign assets was correlated with higher levels of military mobilization. Together, these facts suggest that the classic theory of imperialism may have some empirical support.

Keywords: Imperialism, inequality, foreign investments

JEL Classification: N13, N20, D31

Suggested Citation

Hauner, Thomas and Milanovic, Branko and Naidu, Suresh, Inequality, Foreign Investment, and Imperialism (November 30, 2017). Stone Center Working Paper, 2017, Available at SSRN:

Thomas Hauner (Contact Author)

CUNY - The Graduate Center ( email )

365 Fifth Avenue
New York,, NY 10016
United States

Branko Milanovic

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
Washington, DC 20433
United States
202-473-6968 (Phone)
202-522-1153 (Fax)


University of Maryland ( email )

College Park
College Park, MD 20742
United States

Suresh Naidu

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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