Capital Flight and Foreign Direct Investment in Africa

Leonce Ndikumana and Mare Sarr explore the puzzling simultaneous rise in foreign direct investment (FDI) inflows and capital flight in Africa over recent decades. They examine two questions: Is FDI a potential driver of capital flight? And, is natural resource endowment a possible channel for the capital flight-FDI link? Three important findings emerge. First, while there is no robust evidence that capital flight is fueled by annual FDI inflows, there is a positive relationship between the stock of FDI and capital flight. Second, natural resource endowment is directly related positively to capital flight, especially in the case of oil. Third, high-quality institutions significantly weaken the link between FDI and capital flight.

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Capital Controls in a Time of Crisis

Prior to the financial crisis of 2008, capital controls – measures taken to limit the flow of foreign capital in and out of a domestic economy – were largely discredited by neoclassical economists as wrong-headed economic meddling. But Ilene Grabel writes that the crisis brought about a “rebranding” of capital controls, which are now seen as legitimate and necessary by a broader set of economists. The paper highlights factors contributing to the evolving perception of capital controls among academics and policymakers, and the tensions around this rebranding.

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What is the Relationship Between Income Inequality and Growth?

Income inequality has increased dramatically since the late 1970s. As a result, economists have sought to explain the cause of this increase, and its impact on growth. In a recent PERI Working Paper, Thomas Palley explores the ways that functional and personal income distribution impact growth. By using neo-Kaleckian and Cambridge growth models, he finds that contrary to widespread claims, inequality per se does not impact growth. Instead, Palley writes, both growth and inequality are impacted by changes in the underlying form and pattern of income payments. 

>> Read "Inequality and Growth in Neo-Kaleckian and Cambridge Growth Theory"

Transforming Economic Thinking to Achieve Social Justice

Economic policy has not adequately addressed the pressing challenges we face today: extreme poverty, widespread joblessness and precarious employment, increased inequality, and large-scale environmental threats. A new book, Rethinking Economic Policy for Social Justice, by PERI Associate Director James Heintz and co-authors Radhika Balakrishnan and Diane Elson, shows how human rights have the potential to transform economic thinking and policy-making with significant consequences to social justice. They make a case for a new normative and analytic framework, based on a broader range of objectives than such standard narrow goals as GDP growth. 

>> Read more about Rethinking Economic Policy for Social Justice by Radhika Balakrishnan, James Heintz, and Diane Elson

>> Purchase the book

A $15 Federal Minimum Wage: Who Would Benefit?

Democratic presidential candidate Senator Bernie Sanders is calling for raising the federal minimum wage from $7.25 to $15.00 per hour. In a PERI Research Brief, Jeannette Wicks-Lim shows that a $15.00 minimum wage could deliver raises to approximately 65 million workers—more than two-fifths of the U.S. workforce. Her research shows that large percentages of workers from every major demographic group would receive raises from this wage hike. At the same time, since working women, African-Americans, Latinos, and workers from low-income households disproportionately earn near or below $15 an hour, these groups would benefit the most from a $15 minimum wage.

>> Read “A $15.00 Federal Minimum Wage: Who Would Benefit?”