The demographics of expropriation risk |
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Authors: | Email author" target="_blank">Philipp?HarmsEmail author Philipp?an de?Meulen |
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Institution: | 1.Johannes Gutenberg University Mainz, International Economics,Mainz,Germany;2.RWI Essen, Competence Area Growth and Cycles,Essen,Germany |
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Abstract: | It is often argued that capital should flow from aging industrialized economies to countries with fast-growing populations.
However, institutional failures and the risk of expropriation substantially reduce developing economies’ attractiveness for
foreign investors. We analyze the influence of a country’s demographic structure on international investment inflows, using
a political economy model in which population growth potentially affects the risk of expropriation. We first explore how redistributive
expropriation affects the welfare of different age groups and derive the government’s incentive to expropriate. We then analyze
how the relative size of different generations influences the feasible volume of foreign investment. |
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