Finance and Centre-Periphery Dynamics: A Model
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Abstract
In the last few decades we have witnessed a marked process of economic globalization (that is the growing interrelation and integration of the economic systems of the whole world), accompanied and favoured by what is called financialization (whose definition is more problematic, but we can identify it as the growing relative importance of financial profits compared to those deriving from trade and production of real goods). In this paper, after briefly discussing and defining the two phenomena in the light of the debate about them, we will present a mathematical model to study their effects on the economic development of regions with a different initial capital set-up, which includes human and organizational capital. The model shows that low wages in certain conditions can determine high interest rates, favouring financial flows from peripheral areas to developed countries.
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