Showing papers on "Capital deepening published in 1980"

Capital-energy substitution in US manufacturing

Abstract: The ease with which energy may be substituted for by other types of inputs is of great importance in predicting economic disruptions arising from energy shortages as well as the energy implications of public policy. Studies of energy substitution in the economies of developed countries have produced differing results. A major reason for the divergent results, according to the authors, could be that two quite-different types of capital inputs - physical capital and working capital - have been used. These two types of capital input behave in quite-different ways, at least as regards their relationship with energy inputs to explore this, the authors incorporated the prices of physical capital, working capital, labor, and energy in a constant-returns-to-scale cost function. The authors conclude that reproducible capital and energy are, for the most part, complements - while working capital and energy are largely substitutes in production. Results lead the authors to explain the differences among previous studies by reference to the way in which the capital input was handled. On the level of aggregate US manufacturing a value-added approach to capital cost would be expected to show capital-energy substitutability, while a service-price approach to capital cost would show complementarity. 21 references, 2more » tables (SAC)« less

Substitution, fixed proportions, growth and distribution

Abstract: The labor requirements of machines are fixed forever at the time of construction. The utilization of these machines may change over time. One of the products of this model is a theory of the operating life and labor intensity of capital goods. A machine is retired here when rising wages have absorbed all its revenues. A machine will operate longer the smaller its labor intensity. The labor intensity of the optimal type of new machine depends upon the anticipated course of wages and the rate of interest. These relationships introduce a new dimension to the connection between investment and the growth of productivity. An increase in thrift lowers the rate of return on capital and the labor intensity of new machines, and thus ultimately lengthens the operating life of all machinery. Increased thrift affects productivity through both the lengthening and deepening of capital. An increase in thrift, far from modernizing the capital stock, except temporarily, must eventually increase the average age of machinery.

Increased Unemployment from Capital Accumulation in a Minimum-Wage Model of an Open Economy

Abstract: This paper casts doubt upon a well-known 'employment benefit,' which is supposed to result from an increase in the capital stock of an open economy with unemployed labour in the presence of a rigid real wage for the entire country. Although it is evidently plausible to expect investment to raise the level of total employment in the two-factor case, I capital accumulation could easily lead to a greater level of unemployment if a third factor is added to the model, according to the following analysis. Consequently, as demonstrated below, the national levels of income and welfare might undergo a corresponding investment-induced decline,2 suggesting a new type of 'immiserizing growth. '3 The second section presents a three-factor extension of the (two-factor) two-commodity, minimum-wage model of Brecher (1974a; 1974b).4 Alternatively interpreted, the section adds a binding real-wage floor to the entire labour market of the (flexible-wage) three-factor two-commodity model of Batra and Casas (1976). Under either interpretation the model resulting below is essentially a special case of the n-commodity version of Schweinberger (1978), who allows for n flexible-reward factors plus m factors with rigid real rewards. To emphasize that the essence of the present analysis does not depend upon changes in relative commodity prices, the discussion focuses explicitlv upon the small open economy. facing fixed international terms of

Investment and Growth in an Econometric Model of the United States

Abstract: In its complete form, our Annual Growth Model is a synthesis of Keynesian and neoclassical determinants of actual and potential growth and of prices, production, and employment. In this paper we utilize only the supply side of the model to provide new quantitative estimates of the natural growth path of the U.S. economy since the Korean War and corresponding projections to the end of the century. The past and future contributions of business-fixed capital formation to productivity growth are quantified, and we assess the prospects for augmenting future growth through capital deepening. The complete model includes monetary and fiscal determinants of aggregate demand, but since we are abstracting from the demand side in this paper, nothing can be said here about nominal GNP, the price level, or the policy tradeoffs among inflation, unemployment, and growth targets.

Capital Gains Taxation

Abstract: This paper presents a new approach to the taxation of capital gains that eliminates the deferral advantage present under current realization-based systems, along with the lock-in effect and tax arbitrage possibilities associated with thia deferral advantage. The new approach also taxea capital gains only upon realization but, by effectively charging interest on past gains when realization finally occurs, eliminates the incentive to defer such realization. Unlike a similar scheme suggested previously by Vickrey, the present one does not require knowledge of the potentially unobservable pattern of gains over time. It thus is applicable to a very broad range of capital

A Neoclassical Model of the Dual Economy with Capital Accumulation in Agriculture

Abstract: An economy consisting of two production sectors, with different technologies, distribution systems and labour markets is generally referred to as the dual economy This term has been used mainly for developing countries where the industrial and agricultural sectors differ markedly with respect to the above-mentioned aspects Jorgenson (1967) has classified dual models for developing countries into two types, classical and neoclassical The main difference between the two lies in their assumptions about behaviour in the agricultural sector, which in turn have a bearing on the existence of surplus labour Although the relevance of the assumptions is an empirical question, we should also pay attention to the analysis of Dixit (1970) which shows that when surplus labour disappears in the classical model, the differences between the two are not substantial The neoclassical model originated by Jorgenson (1961) discusses the condition for the industrial sector to emerge from the purely agrarian economy (the viability condition) That is, when per capita food production of the purely agrarian economy exceeds a critical level, the supply of both labour and food is sufficient to enable the development of the industrial sector to begin If the " viability " condition is met, per capita income and the proportion of labour in industry increase monotonically There are three points to note about Jorgenson's model The first is that the production functions of both sectors are specified to be of the Cobb-Douglas type The second is his assumption on the price and income elasticities of demand for food He assumes both elasticities to be zero in the dual development process The third is that his model either assumes away capital accumulation in agriculture or includes it in the exogenous technical progress (See Marino (1975) and Zarembka (1970) for discussions of the first two points, and also Dixit (1973) and Marglin (1966)) In this paper an attempt is made, by relaxing the aforementioned assumptions, to elucidate some important aspects of the dual economy which are relevant from the normative as well as positive points of view, but which have so far been hardly accounted for' Specifically, taking for granted that the viability condition for the emergence of industry is satisfied, we shall study the alternative growth processes of the dual economy It is shown that even if the viability condition is met, a long-run equilibrium path for the dual economy may not exist, and the economy may stagnate at a low wage level attained in the purely agrarian economy We shall also show that when the equilibrium growth path exists, the sum of the income and price elasticities of demand for food plays a crucial role in the long-run behaviour of the system In particular, if the sum is always not larger than unity, then the long-run equilibrium is locally stable, and the economy typically sustains continual rises in per capita income and the proportion of labour in industry On the other hand if the above sum is sufficiently larger than unity, then the equilibrium becomes

Relative Capital Formation in the United States

Abstract: A version of the overlapping-generations model suggests that an increase in the rate of innovation alters capital formation in favor of schooling and other human capital at the expense of physical capital, and tends to reduce total savings, defined as human investments plus financial savings. The theoretical explanation suggests that relative capital formation in human beings, but not necessarily absolute capital formation, is positively associated with the degree of innovation. Analysis of U.S. time-series data supports the hypotheses advanced in the paper.

The Value of Unrealized Farm Land Capital Gains: Comment

Abstract: In a recent issue of this Journal, Plaxico and Kletke (hereafter referred to as PK) analyzed several ways of valuing the unrealized capital gains on farm land. Relatively high rates of appreciation in land values, general price inflation, rising mortgage interest rates, and depressed returns in some agricultural sectors in recent years have enhanced the importance of evaluating land investment decisions. The PK analysis of the value of unrealized farmland capital gains is an important contribution to the work on this issue. However, there are a few conceptual problems with the PK study. Three specific topics are addressed in this comment: (a) the relationship between discount rates and inflation; (b) the conversion of capital gains into a tax-deferred income stream; and (c) the valuation of additional investment opportunities due to the appreciation of land values.

The Distribution of the U.S. Capital Stock between Residential and Industrial Uses

Abstract: The purpose of the present study is to measure the extent to which an increase in the total capital stock induces an increase in the stock of residential capital, i.e., to measure the marginal propensity of additional capital to be absorbed in residential capital. A knowledge of this propensity is important to evaluate the national return on additional saving and to understand the impact that an increased capital stock could have on labor productivity and on the composition of national output. The present paper provides both a theoretical and an empirical examination of this question.

The Effect of the AHSTF on Capital Markets

Abstract: The basic questions addressed in this brief paper are: How has the Alberta Heritage Savings Trust Fund affected the development of capital markets in Canada? What are the implications of the Fund for Canadian financial markets and institutions? Before dealing specifically with each of these basic questions, a fundamental point should be made. It is remarkable that the AHSTF exists at all. The Fund is not a problem; on the contrary, it is an opportunity. And it is of immense credit to the people of Alberta that they have had the imagination and forbearance to forego consumption of a portion of the large revenues accruing from energy and to set aside a pool of savings for capital investment. Real savings are, of course, the only source of capital and the application of capital to economic processes is the main determinant of productivity and hence future growth. The whole world is capital short because of the scarcity of real savings. Canadians are fortunate, indeed, that this province is generating savings, our most valuable and critical resource and the main source of economic opportunity and growth. In many countries large revenues from resources were quickly spent and, indeed, even mortgaged for the future. The result was, invariably, rapid inflation, considerable human misery and a legacy of agricultural and industrial infrastructures which were uncompetitive and a continuing burden for the future. Instead of generating savings to finance productive business and social investment, the basis for improved human welfare, large returns from energy resources have historically been wasted.

Total Investment, Capital, and Economic Growth

Abstract: The purpose of this paper is to summarise the author’s researches into total investment and capital in relation to the growth of real national product and productivity, with particular reference to the economy of the United States of America; and to discuss some of the implications of the empirical findings of the studies.

Secondary workers and the acquisition of negative human capital

Abstract: Frequent job-changing by secondary workers in a rural labor force is found to be consistent with the human capital logic, even though negative human capital attributes are knowingly acquired in the process. The present value of future income streams from a “job-changing” strategy exceeds that from a “staying” strategy if the planning horizon for wood products work is four years or less, which is not an unrealistic length for this particular labor force.