Can receiving too much foreign capital make a rich country grow more slowly?
The Global Financial Resource Curse
Gianluca Benigno, Luca Fornaro, Martin Wolf (2024) · Journal of Political Economy
Replication data ↗ (openICPSR)
The archive requires an account we do not hold, so the files were not opened. What follows rests on the published abstract and on this platform's own observations.
What the authors found
Benigno, Fornaro and Wolf connect two facts about the United States since the late 1990s: large capital inflows from developing countries, the so-called global saving glut, and a productivity growth slowdown. In their model the tradable sector is the engine of growth. Capital inflows raise demand for non-tradable goods, pulling activity out of the tradable sector; lower profits there mean less investment in innovation, and growth slows. Cheap foreign capital acts like a resource windfall.
What our data adds
The current account imbalances that carry these flows are in this database and remain very large. Kuwait runs a surplus of 22.7 per cent of GDP, Brunei 18.0, Singapore 16.7, Qatar 14.8, Norway 14.0 and Switzerland 7.0. At the other end, Suriname runs a deficit of 54.9 per cent, Dominica 38.0 and Timor-Leste 36.9. Tajikistan appears among the largest surpluses at 17.1 per cent, which is not an oil story but a remittance one — money sent home by migrants shows up in the current account exactly as an export would.
Largest surpluses. Tajikistan's is remittances, not oil.
| Figure | Value | Indicator |
|---|---|---|
| Kuwait, current account balance as a share of GDP | +22.7% | BN.CAB.XOKA.GD.ZS |
| Tajikistan, a remittance-driven surplus | +17.1% | BN.CAB.XOKA.GD.ZS |
| Suriname, deficit | -54.9% | BN.CAB.XOKA.GD.ZS |
Every figure here is computed from observations in this database and can be charted, downloaded or queried.
What this cannot show
The paper is about the United States specifically and about a mechanism running through sectoral reallocation and innovation investment, none of which a current account balance can show. Our R&D series would be the natural companion but is too sparse before 2000 to trace a slowdown. The Tajikistan observation is a caution rather than a finding: it shows that a current account surplus does not mean what a casual reader assumes.
The data behind it
Current account balance (% of GDP)
BN.CAB.XOKA.GD.ZS
WBResearch and development expenditure (% of GDP)
GB.XPD.RSDV.GD.ZS