Showing papers on "Capital deepening published in 1974"
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TL;DR: In this article, the authors present a theory of economic development very different from the "stages of growth" hypothesis or strategies emphasizing foreign aid, trade, or regional association, focusing on the use of domestic capital markets to stimulate economic performance.
Abstract: This books presents a theory of economic development very different from the "stages of growth" hypothesis or strategies emphasizing foreign aid, trade, or regional association. Leaving these aside, the author breaks new ground by focusing on the use of domestic capital markets to stimulate economic performance. He suggests a "bootstrap" approach in which successful development would depend largely on policy choices made by national authorities in the developing countries themselves.Central to his theory is the freeing of domestic financial markets to allow interest rates to reflect the true scarcity of capital in a developing economy. His analysis leads to a critique of prevailing monetary theory and to a new view of the relation between money and physical capitala view with policy implications for governments striving to overcome the vicious circle of inflation and stagnation. Examining the performance of South Korea, Taiwan, Brazil, and other countries, the author suggests that their success or failure has depended primarily on steps taken in the monetary sector. He concludes that monetary reform should take precedence over other development measures, such as tariff and tax reform or the encouragement of foreign capital investment. In addition to challenging much of the conventional wisdom of development, the author's revision of accepted monetary theory may be relevant for mature economies that face monetary problems."
200 citations
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169 citations
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TL;DR: A survey of research in the distribution of labor incomes in which human capital theory serves as an organizing principle can be found in this article, where the role played by individual and family optimizing decisions in human capital investments is brought back within the mainstream of economic theory and within its analytical and econometric tools.
Abstract: The traditional studies of income distribution, a field with which economists are becoming increasingly concerned, must be described as basically sociological. The ascendancy of the human capital approach can be viewed as a reaction of economists to this non-economic, though certainly not irrelevant, tradition. In stressing the role played by individual and family optimizing decisions in human capital investments, important aspects of income determination are brought back within the mainstream of economic theory and within the power of its analytical and econometric tools. Human capital is not the only element of choice in the analysis of income distribution . Nevertheless, it appears that the subject of human capital investments lends itself to a more systematic and comprehensive analysis of wage differentials, than each of the other factors. The following is a description of research in the distribution of labor incomes in which human capital theory serves as an organizing principle. It is, in part, a sequel to my 1970 survey and, in part, a report of ongoing research of my own and of others.
106 citations
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TL;DR: In the early 1970s, the population in the Comecon countries was growing at 1-4 per cent p.a. as discussed by the authors, but employment was in fact expanding faster.
Abstract: Since the Second World War the Comecon countries have experienced a remarkable growth of employment. Over the period 1950–70 it rose from 103m. to 145m. in the region. There was a rapid growth of population, averaging 1–3 per cent p.a., but employment was in fact expanding faster — at 1–4 per cent p.a.1 This was due to the policy of full employment, the utilization of underemployed labour in agriculture and domestic service mostly by transfers to industry, the increasing employment of women, and in the 1960s it was due to the post-war birth boom entering the labour market. This expansion of employment facilitated rapid economic development via the extensive growth strategy, and lesser concern was displayed for improvements in the efficiency of labour.
24 citations
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18 citations
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TL;DR: In this paper, the authors take up an important approach to capital which had gone out of fashion: the 'Austrian' theory of capital concentrates on the inputs and outputs in the productive process, and has an advantage over more modern theories of economic dynamics in that it is more naturally expressible in economic terms.
Abstract: This book, first published in 1973, takes up an important approach to capital which had gone out of fashion. It is being reissued in paperback in recognition of the recent renewed interest in this approach. The 'Austrian' theory of capital concentrates on the inputs and outputs in the productive process, and has an advantage over more modern theories of economic dynamics in that it is more naturally expressible in economic terms: the production process over time is taken as a whole, rather than disintegrated. However, this approach had been largely abandoned because it seemed to be unable to deal with fixed capital. Sir John overcomes this problem here by allowing for a sequence of outputs, and the consequences for dynamic economics are profound and novel.
11 citations
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TL;DR: In this article, the authors present a simple analytical framework that overcomes these deficiencies and then evaluate, against clear standards, whether the extent of underutilization in fact is greater in less-developed economies than in advanced economies.
Abstract: "Labour-surplus" and "capital-shortage" have long been used to characterize underdeveloped economies. However, we are increasingly concerned that most (if not all) capital-poor, underdeveloped economies are afflicted with under-utilization of scarce capital in their manufacturing sectors. Kim (1969) presented a statistical estimate of sectoral capital coefficients in a number of countries with results that support the hypothesis of under-utilization. Winston's (1971, 1974d) analysis of Pakistan found the level of industrial capital utilization in the order of 14 per cent. More recently, Kim and Kwon's (1973) study of the manufacturing sector in South Korea showed that the average aggregate utilization rate (exclusive of heavy electricity-using and continuous process industries) during 1962 through 1971 ranged between 13 to 17 per cent depending on the choice of alternative measures. These estimates from the two underdeveloped economies compare with 23 per cent utilization of US manufacturing capital in 1962. All these estimates are based on Foss' measure (1963), which gives the number of hours a given equipment is operated in a 8,760-hour year (365 days times 24 hours), expressed in percentages. Accepted theories cannot evaluate the economic significance of these findings. Two shortcomings are central: (1) "under-utilization" or "excess capacity" denotes a situation in which actual utilization of capital is below a level that is optimal in some clearly defined sense, yet that optimal level is rarely defined; and (2) that optimal level of utilization is neither a twenty-four-hour-a-day maximum nor an engineering constant. Instead it is part of an economic decision and responds to economic variables. It is the purpose of this paper to present a simple analytical framework that overcomes these deficiencies and then to evaluate, against clear standards, whether the extent of under-utilization in fact is greater in less-developed economies than in advanced economies. The results of past statistical studies convey two related facts. First, on the basis of inter-country comparisons, a positive (or at least, nonnegative) relationship seems to prevail between the sectoral output/ capital-stock ratio and the level of economic development (Kim, 1969). Secondly, on the basis of individual country studies, albeit limited, there appears to be a positive relationship between the utilization of capital stock (hours of operation) of either manufacturing as a whole or individual manufacturing sectors and the level of economic development (Bureau of the Census, 1966-; Foss, 1963; Kim and Kwon, 1973; 377
11 citations
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TL;DR: In this paper, the impact of foreign capital on the growth rate in the context of a savings constrained growth model with neo-classical technology is analyzed. And the authors conclude that foreign capital will have a positive impact on the domestic income as long as it grows at a rate higher than the product of the domestic saving rate by the profit rate required by foreign capitalists.
Abstract: One of the main issues in the controversy about the desirability of the inflow of foreign capital in LDCs refers to the impact which this capital might have on the output growth rate of the recipient countries. In the first part of this paper we analyze the impact of foreign capital on the growth rate in the context of a savings constrained growth model with neo‐classical technology. In the second part, we study the impact of foreign capital on the growth rate under balance‐of‐payments constrained growth. Two main conclusions are: under neoclassical conditions, foreign capital will have a positive impact on the growth rate of domestic income as long as it grows at a rate higher than the product of the domestic saving rate by the profit rate required by foreign capitalists. Under balance‐of‐payments constrained growth, the growth rate of foreign capital needs to be higher than its own profit rate in order to have a positive impact on the growth rate of territorial income, if foreign trade parameters of ove...
7 citations
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TL;DR: In this paper, the authors present a paradox: if capital is scarce in developing countries, why is it underutilized, which leads to an inefficient industrial structure, which discourages technological progress and leads to inefficient industrial structures.
Abstract: It is a well-known fact that capital is scarce in most of the developing countries and thus some of the production factors, such as labour, remain -unemployed, leading toa lower growth rate of G.N.P. than would be possible under. full employment. Additions to the stock of capital not only increase the rate of growth but also provide new job opportunities. However, in many developing countries, capital is utilised less than one-third of the time [10,p.381. The underutilization of capital obviously shrinks the growth rate of less developed countries still fUrther. Capacity underutilization discourages technological progress which leads to an inefficient industrial structure. This presents uS with a paradox: if capital is scarce in developing countries, why is it underutilized
6 citations
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TL;DR: In this paper, historical incremental capital output ratios (ICORs) are investigated as tools for projecting investment requirements for economic development, and possible departures of the actural values of these ratios from the projected ones are examined.
Abstract: Historical incremental capital output ratios (ICORs) are investigated as tools for projecting investment requirements for economic development. Possible departures of the actural values of these ratios from the projected ones are examined. The empirical results of the trends of historical as compared to planned ICORs in a number of countries which explicitly or implicitly have used such ICORs in their development plans are presented and analyzed. ICORs can be used with some degree of caution as a guide for allocation of capital investment, both overall and to particular sectors or industries, such as agriculture, manufacturing, housing, transportation and utilities. /DOT/
3 citations
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TL;DR: In this paper, the authors examined the feasibility of forward and backward measures of formation of human capital in the simplest case (of full-time schooling) in parallel with physical capital, and proposed new possibilities in contributions of national accounting to a dynamic analysis of economic development.
Abstract: The central concern of this paper is with the treatment of human resources in dynamic applications of capital and growth accounting. Despite many advances, national accounting conventions still give biased profiles of the economy, but the time is ripe for experimentation with measures that can correct those biases and provide a more adequate base for assessment of long-term economic performance and prospects.
In the first section, the logic and feasibility of forward and backward measures of formation of human capital in the simplest case (of full-time schooling) is examined in parallel with physical capital. In a dynamic economy, which is rarely if ever in equilibrium, these approaches complement each other; they are poor substitutes. In section two a number of conceptual and measurement issues are considered with particular reference to human-capital investment periods and the treatment of appreciation, depreciation and obsolescence of human versus physical capital. Here special attention is given to the extended periods of investments in human resources, which overlap with realization of returns, and to the processes and agencies through which postschool investments are made. The last section presents a brief statement concerning asymmetries in disequilibrium biases with respect to the formation of human relative to physical capital. Drawing upon section 1 with regard to forward and backward measures and section 2 with regard to the critical importance of postschool learning, new possibilities in contributions of national accounting to a dynamic analysis of economic development are suggested.
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TL;DR: In this article, economic and demographic and educational factors and parameters are used to construct a production function for human capital structure which is called the technical model, which is subsequently used as a constraint in the determination and analysis of the least-cost condition of achieving alternative plans.
Abstract: There exists a need in less---as well as more---advanced economies for human resource development as an integral part of a planning program and a means of avoiding structural or sectoral unemployment. As a first approximation in planning a human capital structure for a given country, a set of ratios such as students per teacher, inhabitants per physician, nurse or lawyer, etc., may be considered a long-run plan objective. In this paper, economic as well as demographic and educational factors and parameters are used to construct a production function for human capital structure which is called the technical model. The technical model is subsequently used as a constraint in the determination and analysis of the least-cost condition of achieving alternative plans.
One of the theoretical results here is that such ratios become larger as the average percentage of student “dropouts” per year increase. The model shows that the marginal cost of improving the quality of human capital by a requirement for a longer training period or by the establishment of stiffer educational standards is an increasing function of such educational variables. Finally, the model gives an explicit algebraic expression for the qualitative-quantitative transformation-professional expertise vs. the number of personnel produced-existing in the production of human capital for equal or comparable costs. The model can be used for regional as well as global planning and in a mixed capitalist as well as a socialist economy.
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TL;DR: In this article, the long-term release of capital by relatively backward regions with low economic growth is demonstrated, and the question arises what are the relations between the internal capital deposits of a region and the economic growth of the region.