Re: random thoughts on income gaps and the mobility of capital

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From: Dave Long (
Date: Tue Feb 22 2000 - 09:21:17 PST

> has fallen faster in poorer countries. Furthermore, evidence exists that
> wealth creation is a consequence of reduced mortality

At least in the US, there's a strong correlation of wealth with age.
The rich are likely to be old, and the young likely to be poor.
(this is one reason talking about gaps between "the rich" and "the
poor" can be excessively divisive, if most of the population turns
out to be in both classes at different parts of their lifetimes[1])
It may be interesting to figure how much of wealth creation via
mortalitity reduction is due to accumulation over longer periods.
(with family trusts, we may even have data on entities that span
several lifetimes)

> startups in India in the last six months, capital flowing in, and if only the
> Indian government would relax rules that say all Indian companeis must be at
> least 72% owned domestically, we'd be moving half our activity there..."

It may be splitting hairs, but I'd make the following distinction,
based on where the capital accumulates:

If I can take my capital, and move to India, Sri Lanka, Switzerland,
or some other such place, then it's truly mobile capital. On the other
hand, if I stay home yet retain full ownership of an Indian concern,
then in all fairness, it should be considered stationary capital.

Of course, if the Indian concern then defaults (apparently a common
occurence for foreign investment in the US in prior centuries), I'd
be willing to count whatever development was still useful as capital
which had moved[2].


[1] yet another reason, according to the 1998 Consumer Expenditure
    Survey, is that there is a clear correlation between quintile and
    average number of earners in a consumer unit: from .7 earners in
    the lowest quintile, through 1.3 in the third, to 2.1 in the top
    quintile. Number of earners isn't the whole story though: there
    was a fourteen-fold difference between the average income of
    consumer units in the top and bottom quintiles; a three-fold
    difference in number of earners leaves a 4.6-fold difference for
    other factors. [note also that these are income quintiles, not
    wealth quintiles]

[2] I'm curious to see who will make use of the vacant AutoNation on
    the local freeway, and how. Out in the desert, I notice that
    land and construction is cheap enough that they don't reuse old
    locations -- why bother, when one can just throw up new boxes?

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