"Many of the most pernicious economic institutions and policies create entry barriers or manipulate factor prices to transfer resources from entrepreneurs and workers to groups that hold political power. These inefficiencies partly result from the fact that direct and efficient fiscal...

We show that capital controls have large adverse effects on misallocation, exports and welfare using a dynamic Melitz-OLG model with heterogeneous firms, monopolistic competition, endogenous trade participation and collateral constraints. Static effects increase misallocation by reducing...