GTAP Models: Foreign Capital Ownership
With the incorporation of international capital mobility it becomes necessary, for purposes of examining the welfare effects, to take account of foreign capital ownership. In the dynamic GTAP Model, regional capital is owned by both domestic households and by foreign households via a global trust. The saving of each regional household is then allocated either to domestic investment or to foreign investment. This allocation assumes that the shares of domestic and foreign investments are held constant, subject to the adding-up constraints required to ensure regional saving and investment constraints.This is consistent with empirical evidence that investors tend to invest first in their home economies and then abroad.
Last Modified: 9/7/2011 7:27:36 AM
