Laura, Alfaro ; Sebnem, Kalemli-Ozcan ; Sebnem, Kalemli-Ozcan ; Vadym, Volosovych ; Vadym, Volosovych ; Laura, Alfaro. (2011) Sovereigns, Upstream Capital Flows, and Global Imbalances.
In: CEPR Discussion Papers. RePEc:cpr:ceprdp:8648.

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Our results in this paper are fully consistent with our previous results. We show that capital is ïowing to productive places, measured as average growth, during the last three decades once we account for the fact that low-growth countries receive a lot of capital in the form of aid and public debt from other sovereigns or multinational bodies (sovereign-to-sovereign lending). Does this mean then there is also no Lucas puzzle within the developing countries? This would be the case if relatively poor countries are the growing ones within the developing country sample. In a sample of 90 developing and industrial countries between 1980â2004, Dollar and Kraay (2006) ïnd, after they control the outlier nature of China, that there is a negative relation between capital ïows and initial GDP per capita (no Lucas puzzle) and there is a positive relation between capital ïows and growth. Appendix Table 14 takes a look at this issue in our sample of developing countries.