Capital Mobility in a Dynastic Framework

This paper studies the pattern of capital mobility with a two-country dynastic model in which each country is exogenously characterised by its degree of altruism towards children. The steady-state welfare implications of restricted as well as unrestricted capital mobility are established. It is shown that world integration increases the steady-state welfare of the more altruistic capital exporting country and can either increase or reduce the steady-state welfare of the less altruistic capital importing country.