The global financial resource curse

Benigno, Gianluca; Fornaro, Luca; Wolf, Martin

doi:http://dx.doi.org/10.1257/aer.20211792

The global financial resource curse

Citation

Benigno G, Fornaro L, Wolf M. The global financial resource curse. Am Econ Rev. 2025 Jan;115(1):220-62. DOI: 10.1257/aer.20211792

Abstract

We provide a model connecting the global saving glut to productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for US nontradable goods, inducing a reallocation of US economic activity from the tradable sector to the nontradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth.