Laura Alfaro earned her Ph.D. in Economics from the University of California, at Los Angeles (UCLA) in 1999, where she was recipient of the Dissertation Fellowship award. She received a B.A in economics with honors from the Universidad de Costa Rica in 1992 and a 'Licenciatura' from the Pontificia Universidad Catolica of Chile in 1994, where she graduated with highest honors. In 1992, she was awarded a Francisco Marroquin Foundation scholarship. She is also Faculty Research Fellow in the National Bureau of Economic Research’s International Macroeconomics and Finance Program and Faculty Associate at Harvard's Weatherhead Center for International Affairs.
Her latest research has focused on the role local institutions play in attracting capital flows and allowing positive benefits of such flows, in particular foreign direct investment (FDI), to materialize. Her work finds that FDI plays an important role in contributing to economic growth. However, the level of development of local financial markets is crucial for these positive effects to be realized. Whereas bad financial markets may mean that a country is not in a position to cope with unregulated short-term capital flows, this research suggests that the full benefits of long-term stable flows also may not be realized in the absence of well-functioning financial markets. Other related work has found that institutional quality has been the main variable explaining the lack of flows of capital from rich countries to poor ones--the Lucas Paradox. The result of this research suggests that countries should weigh the cost of policies aimed at attracting FDI and capital flows versus those that seek to improve local conditions. These two policies need not be incompatible. Better local conditions not only attract foreign capital but also allow host economies to maximize the benefits of foreign investments.
Professor Alfaro is the author of multiple articles published in leading academic journals, and of Harvard Business School cases related to the field of international economics and in particular international capita flows, foreign direct investment and sovereign debt. Other research interests include political economy, capital controls, and exchange-rate-based stabilization programs.