Two reasons why capital may not flow to poor countries are that the poorer countries may:
A) have economies unlike those described by a Cobb-Douglas production function and not be subject to diminishing returns to capital.
B) have already accumulated high levels of capital relative to labor and may already have access to advanced technologies.
C) legally prevent the inflow of foreign capital and provide strong legal protection of private property.
D) have inferior production capabilities and not enforce property rights.

Question

Quizplus · Accepted Answer

Poorer countries may not have the same level of infrastructure, technology, or skilled labor, which may lead to lower productivity and less efficient use of capital. Additionally, poor enforcement of property rights and corruption may deter foreign investors from investing in these countries.

Two Reasons Why Capital May Not Flow to Poor Countries