Document Type

Dissertation

Date of Award

1970

Keywords

Economic development, Mathematical models, Dynamic models, International capital movements, Foreign investments

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Kenneth K. Kurihara

Second Advisor

Stanley H. Cohn

Third Advisor

John E. Latourette

Series

Social Sciences

Abstract

There has been a growing awareness that the traditional theory of international capital movements is static and must be reformulated by including dynamic elements that are common in the actual world. This awareness has long since occupied the mind of the present author whose study covers not only the so-called ‘classical’ theory of J.S. Mill, F.W. Taussig, F.G. Graham, et al, and the ‘modern’ theory of B. Ohlin, G. Harberler, R.F. Harrod, et al, in the field of international economics, but also the postwar development of the theory of economic growth initiated by R.F. Harrod and E.D. Domar. The lack of dynamic factors in the traditional theory of capital movements is due to the fact that capital movements have almost always been considered as a short-run problem that could and should be solved within the established balance-of-payments mechanism. The static and short-run nature of the established theory needs now to be supplemented by consideration of the dynamic and long-run aspects of international capital movements observed in the real world. The role of capital as a real factor of production ought to be introduced explicitly. Only fragments of that type of capital movement theory which is concerned with real capital as a productive factor exist today, as has been pointed out by R. Nurkse. In short, it is of academic as well as practical importance to theorize the dynamic and long-run aspect of international capital movements.

When it comes to the theory of economic growth, thus far there have been no substantial attempts made in this direction with the exception of a few such as H.G. Johnson’s, H. Brems’, P.K. Bardhan’s and D.C. Smith's. Among the two major currents of growth theory, the Harrod-Domar-type fixed-coefficient model still retains usefulness in comparison with the neo-classical variable-coefficient model. For the actual world is composed of capital-deficient economies, on the one hand, and economies with labor unions and pressure groups, on the other.

This work has three analytical purposes: The first is to reveal possible effects of capital imports on the rapid growth of an underdeveloped economy, the second is to indicate possible effects of capital exports on the stable growth of an advanced economy, and the third is to bring out the interacting effects of international capital movements on the respective growth patterns of the two economies in the mixed advanced-underdeveloped world. For the purposes of analysis, the original Harrod-Domar growth model for a closed economy shall be extended and transformed into an explicitly dynamic model for an open economy. The mathematical model built therefore will constitute the core of the present attempt to analyze the international capital movements in the context of a growing world economy.

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