Inequality, Foreign Investment, and Imperialism
Stone Center Working Paper, 2017
53 Pages Posted: 21 Dec 2017
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: Suggested Citation