Capital Flight

When the scarce capital available to a less developed country leaves for the safety and security of a more developed economy. Financial capital flight occurs when savers prefer to put their money in foreign banks to domestic banks, reducing the supply of loanable funds in a poor county. Human capital flight is also known as “brain drain” when the skilled workers in a poor country prefer to seek work in a richer country, reducing the production possibilities of the less developed country.

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