Compute optimal capital control (Y-axis) as function of productivity elasticity wrt investment (x-axis)

Trade-off is relevant -> Adding investment and misallocation turns tax (dashed black) into subsidy (solid blue)

Result driven mostly by effects on productivity

I leverage Orbis data to obtain estimates for 18 countries

Using firm-level balance sheet data, estimate misallocation (dispersion in marginal returns to capital)

Use as input to obtain elasticity of TFP with respect to investment

I am on the Job Market!
In my #EconJMP, I study optimal capital controls considering previously overlooked effects on investment and productivity using a sufficient statistic approach

Estimating productivity losses using micro-data, I find that capital flows should be incentivized.
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