Showing papers on "Capital deepening published in 1998"
30 Apr 1998
TL;DR: The missing link is social capital as discussed by the authors, which is the way in which the economic actors interact and organize themselves to generate growth and development, but no consensus about which aspects of interaction ad organization merit the label of social capital, nor in fact about the validity of the term capital to describe this.
Abstract: Sustainable development has been defined as a process whereby future generations receive as much capital per capita as--or more than--the current generation has available (Serageldin). Traditionally, this has included natural capital, physical or produced capital, and human capital. Together they constitute the wealth of nations and form the basis of economic development and growth. In this process the composition of capital changes. Some natural capital will be depleted and transformed into physical capital. The latter will depreciate, and we expect technology to yield a more efficient replacement. This century has seen a massive accumulation of human capital. It has now become recognized that these three types of capital determine only partially the process of economic growth because they overlook the way in which the economic actors interact and organize themselves to generate growth and development. The missing link is social capital. There is, however, no consensus about which aspects of interaction ad organization merit the label of social capital, nor in fact about the validity of the term capital to describe this. Least progress has been made in measuring social capital and in determining empirically its contribution to economic growth and development. This report addresses each of these issues in turn.
651 citations
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TL;DR: In this paper, the authors investigate tests of the specific capital model and consider whether these tests are successful in distinguishing the specific-specific capital model from a model based on heterogeneity, and conclude that, while deriving convincing direct evidence for the particular-capability model of mobility is difficult, it appears that specific capital is a useful construct for understanding worker mobility and wage dynamics.
Abstract: Three central facts describe inter-firm worker mobility in modern labor markets: 1) long-term employment relationships are common, 2) most new jobs end early, and 3) the probability of a job ending declines with tenure. Models based on firm-specific capital provide a parsimonious explanation for these facts, but it also appears that worker heterogeneity in mobility rates can account for much of what we observe in these data. I investigate tests of the specific capital model and consider whether these tests are successful in distinguishing the specific capital model from a model based on heterogeneity. One approach uses longitudinal data with detailed mobility histories of workers. These analyses suggest that both heterogeneity and specific capital (implying true duration dependence in the hazard of job ending) appear to be significant factors in accounting for mobility patterns. A second approach is through estimation of the return to tenure in earnings functions. This is found to have several weaknesses including endogeneity of tenure and the lack of tight theoretical links between tenure and accumulated specific capital and between productivity and wages. A third approach is to use of data on the earnings experience of displaced workers. Several tests are derived based on these data, but there is generally an alternative heterogeneity-based explanation that makes interpretation difficult. Nonetheless, firms appear willing to pay to encourage long-term employment relationships, and they may do so because it is efficient to invest in their workforce. On this basis, I conclude that, while deriving convincing direct evidence for the specific capital model of mobility is difficult, it appears that specific capital is a useful construct for understanding worker mobility and wage dynamics.
480 citations
TL;DR: In this article, the authors study capital accumulation and innovation as determinants of long-run growth by adding capital to their earlier model of creative destruction, and show that a subsidy to capital accumulation will raise the long run growth rate.
Abstract: We study capital accumulation and innovation as determinants of long-run growth by adding capital to our earlier model of creative destruction No special functional forms are imposed on the aggregate production function The equations describing perfect foresight equilibrium are identical to those of the augmented Ramsey-Cass-Koopmans model, except that the rate of technological change is a function of the stock of capital per effective worker Contrary to previous models, a subsidy to capital accumulation will raise the long-run growth rate The key assumption is that capital is used in R and D Some evidence is presented on the capital intensity of R and D
333 citations
TL;DR: The balance-of-payments-constrained growth model was proposed in this article, where capital flows and the balance of payments constrained growth model were discussed. But the model was not applied to the real world.
Abstract: (1998). On Capital Flows and The Balance-of-Payments-Constrained Growth Model. Journal of Post Keynesian Economics: Vol. 21, No. 2, pp. 283-298.
199 citations
TL;DR: In this paper, the effects of factor income taxation and of subsidies to human capital accumulation in models of endogenous growth are examined, in particular how these effects depend on the specification of the leisure activity and on the technology and tax treatment of the sector producing human capital.
154 citations
TL;DR: In this article, the authors present an empirical analysis of Chile's recent experiences with capital controls and make some comparisons to the recent experiences of Columbia, concluding that capital controls in Chile have had mixed results: while they have allowed the Central Bank to have a greater degree of control over short term interest rates, they have failed in avoiding real exchange rate appreciation.
Abstract: This paper deals with some of the most important aspects of Latin America's experience with capital flows during the last twenty-five years. The paper begins with a historical analysis. I then deal with the sequencing of reform and discuss issues related to the relationship between capital flows, real exchange rates, and international competitiveness. I next concentrate on the role of capital controls as a device for isolating emerging economies from the volatility of international capital markets. I begin by reviewing the policy issues and the current debate on the subject. I then present an empirical analysis of Chile's recent experiences with capital controls and make some comparisons to the recent experiences of Columbia. The analysis of the Chilean experience is particularly important since its practice of imposing reserves requirements on capital inflows has been praised by a number of analysts, including senior staff of the multilateral institutions, as an effective and efficient way of reducing the vulnerability associated with capital flows volatility. The results obtained suggest that capital controls in Chile have had mixed results: while they have allowed the Central Bank to have a greater degree of control over short term interest rates, they have failed in avoiding real exchange rate appreciation. The paper ends with some reflections, based on recent Latin American historical episodes, on the role of banks in intermediating capital inflows and on financial crises.
143 citations
TL;DR: In this paper, the quantitative impact of eliminating capital income taxation on capital accumulation and steady-state welfare in a general equilibrium model with overlapping generations of sixty-five-period-lived individuals who face idiosyncratic earnings risk, borrowing constraints, and life-span uncertainty was studied.
Abstract: This paper studies the quantitative impact of eliminating capital income taxation on capital accumulation and steady-state welfare in a general equilibrium model with overlapping generations of sixty-five-period-lived individuals who face idiosyncratic earnings risk, borrowing constraints, and life-span uncertainty. Under a wide range of parameter configurations, the capital income tax rate that maximizes steady-state welfare is positive, even though eliminating it completely would raise the steady-state capital stock toward the Golden Rule. This is because the tax burden is shifted toward the younger and liquidity constrained years, reducing the individuals' ability to self-insure. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
131 citations
01 Jan 1998
TL;DR: In this paper, the authors show that the level of government investment varies considerably across countries, ranging between 1.3 per cent of GDP for the UK and 5.8 per cent for Switzerland in 1992.
Abstract: During the 1970s and 1980s many OECD countries have offset increases in debt interest payments and rising social security transfers by winding back public investment. Figure 14.1 shows government investment (excluding residential buildings) as a share of GDP for 18 OECD countries over the period 1970–92. The data relate to consolidated general government and have been taken from the Standardised National Accounts compiled and published by the OECD. As follows from Figure 14.1, public capital spending as a share of GDP declined or remained stable in almost all countries between 1970 and 1992. Spain and Portugal are exceptions. In order to become more competitive within the European Union, these countries undertook extensive programmes of upgrading their stock of public capital. A small rise occurred also in Italy. Another conclusion that can be drawn from figure 14.1 is that the level of government investment spending varies considerably across countries, ranging between 1.3 per cent of GDP for the UK and 5.8 per cent for Switzerland in 1992.
130 citations
TL;DR: In this paper, the authors examined recent trends in the venture capital market and current research that explores the impact of these trends on various segments of the market which may indicate overheating.
Abstract: This paper examines recent trends in the venture capital market and current research that explores the impact of these trends. High returns in the venture capital industry caused by the surging market for venture-backed initial public offerings and recent reductions in the capital gains tax rate have led to dramatic increases in venture capital commitments. This rise in fundraising has had dramatic effects on various segments of the venture capital market which may indicate overheating. The terms and conditions of venture capital limited partnerships have changed reflecting the growth in demand for venture capital services. The share of profits retained by venture capitalists has increased while the restrictiveness of the partnership agreements has eased. Venture firms are raising substantially larger funds with increasing pressure to find investments, thereby moving to later stage investments. The price of investments has also responded to the growing desire to increase investment. Finally, institutional investors are increasingly looking internationally for new investment opportunities in venture capital to avoid potential market excesses.
121 citations
TL;DR: In this paper, a U-shaped relationship between agricultural intensification and farm household investment in renewable resource capital is established using a simple neoclassical type growth model including both man-made and natural capital as inputs to production.
115 citations
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01 Jun 1998
TL;DR: In this paper, public capital spending and growth productivity effects of public capital sectoral cost elasticities of public infrastructure output effects of infrastructure investment conclusions are investigated. But the authors focus on the Netherlands and do not consider other countries.
Abstract: Part 1 Development: public capital spending in the Netherlands public capital spending in the OECD. Part 2 Impact: modelling public capital spending and growth productivity effects of public capital sectoral cost elasticities of public infrastructure output effects of infrastructure investment conclusions. Appendices: stationarity.
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TL;DR: In this paper, the role of social capital in the development process is explained, and the authors show that trust is an important factor in explaining the differences in the rate of economic growth in this set of countries.
Abstract: It is argued in order to explain large differences in the level of the development and the growth of economies cannot be adequately explained only by looking the traditional inputs of labour, capital and natural resources. The hypothesis is that also the role of social capital needs to be taken into account. First the concept of social capital is defined and discussed. Then the role of social capital in the development process is explained. Empirical test based on the cross-country data of 27 countries indicates that trust as a component of social capital is an important factor in explaining the differences in the rate of economic growth in this set of countries. This supports the idea that the role of the trust to rules of the economic behaviour has indeed an important role to play in good economic performance. On the contrary the participation index is not statistically significant. This is in contrast with some other, usually micro-based studies where participation has proved to be important in improving the performance of the development projects. The report is part of a VATT research project "Human Capital and Entrepreunership".
TL;DR: This paper examined the composition of public spending and its implications for economic growth and found that reshaping public spending priorities in favor of human resource development and away from military spending would positively stimulate world economic renewal.
Abstract: The authors examine the composition of public spending and its implications for economic growth. They use a translog production function by treating gross domestic product as the output and labor, private capital, and several types of public sector capital stocks as the inputs, using time series data for 25 countries for 1965-84. The production functions of all but four countries exhibited increasing returns to scale. The highest output elasticity was for human resource development capital, followed by private capital and labor. Output elasticity of infrastructure capital was found to be relatively small, with the exception of Latin American countries where it exhibited relatively high values. Military capital had negative output elasticity in slightly more than half of the cases considered. The results suggest that reshaping public spending priorities in favor of human resource development and away from military spending would positively stimulate world economic renewal.
TL;DR: In this article, the authors developed a model where the firm makes decisions about whether to replace or upgrade its old capital stock with new capital, and the model is used to study how technological characteristics of capital affect investment behavior.
TL;DR: The authors examined the role of the formation of human capital in propagating shocks over the business cycle and showed that a two-sector equilibrium business cycle model with human capital is able to generate persistence in the growth of output and other aggregate variables comparable to that observed in the post-war US data.
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TL;DR: In addition to altering fiscal, monetary, and exchange rate policies in response to the surge in international capital inflows in the early 1990s, policy makers in many countries in ASIa, Eastern Europe, and Latin America have resorted to measures to control capital inflow as mentioned in this paper.
Abstract: In addition to altering fiscal, monetary, and exchange rate policies in response to the surge in international capital inflows in the early 1990s,policy makers in many countries in ASIa, Eastern Europe, and Latin America have resorted to measures to control capital inflows.We provide a preliminary assessment of the effects of some of the macroeconomic effects of these policies.
TL;DR: In this paper, the effects of financial liberalization on capital flight in African economies were assessed using a portfolio model, in which capital flight is one of the assets, on a sample of nine African countries for 1970-91.
TL;DR: In this paper, the effects of labor and capital income taxation on the transitional dynamics to the balanced path of the economy were studied. And the authors considered the taxation welfare cost in two non-trivial generalizations of their basic model which include the case of physical capital in the educational sector and leisure as an additional argument in the utility function.
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01 Jan 1998
TL;DR: In this article, a new analytical framework for capital as a crystallization of power is proposed, based on Thorstein Veblen's separation of industry from business and on Lewis Mumford's dichotomy between democratic and authoritarian techniques.
Abstract: Existing theories of capital, neo-classical as well as Marxist, are anchored in the material sphere of production and consumption. This article offers a new analytical framework for capital as a crystallization of power. The relative nature of power requires accumulation to be measured in differential, not absolute, terms. For absentee owners, the main goal is not to maximize pro.ts, but rather to “beat the average” and exceed the “normal rate of return”. The theoretical framework builds on Thorstein Veblen’s separation of industry from business and on Lewis Mumford’s dichotomy between democratic and authoritarian techniques. Extending their contributions, we argue that capital is a business, not an industrial category, a human mega-machine rather than a material artefact. Indeed, it is the social essence of capital which makes accumulation possible in the .rst place. Capital measures the present value of future business earnings, and these depend not on the productivity of industry as such, but on the ability of absentee owners strategically to limit such productivity to their own differential ends. Introducing the twin concepts of the “differential power of capital” (DPK) and the rate of “differential accumulation” (DA), we examine the non-linear and possibly negative link between industrial growth and accumulation in the USA.
TL;DR: This paper study the cointegration properties of data on aggregate output, five proxies for labor, two proxies for private capital, public capital, and disaggregated public capital for the United States for 1948-1993.
Abstract: We study the cointegration properties of data on aggregate output, five proxies for labor, two proxies for private capital, public capital, and disaggregated public capital for the United States for 1948–1993. We find evidence of multiple cointegrating vectors; we typically find three or four cointegrating vectors depending on which combination of proxies is evaluated. When public capital is disaggregated by type there is less evidence for cointegration. Finally, innovations in public capital have long lasting effects on output, labor, and private capital, and innovations to output, labor, and private capital also have long lasting effects on public capital.
TL;DR: In this paper, the authors study the integration in the world capital market between the economies of the core and periphery in the twentieth century and argue that understanding the changing relations in international capital markets offers important insights into the growth and development process.
TL;DR: In this paper, a new measure and test of international capital mobility is proposed, focusing on the correlation between the country's consumption and net output instead of correlation between domestic saving and domestic investment proposed by Feldstein and Horioka.
TL;DR: This paper found that TFP growth is faster in industries that are more intensive in capital and intermediate goods and less intensive in labor, favoring idea models over rival human capital models of endogenous growth.
TL;DR: The human capital of young and old workers are imperfect substitutes both in production and in providing on-the-job training as mentioned in this paper, which helps explain why capital does not flow from rich to poor countries, causing instantaneous convergence of per capita output.
Abstract: The human capital of young and old workers are imperfect substitutes both in production and in providing on-the-job training. This helps explain why capital does not flow from rich to poor countries, causing instantaneous convergence of per capita output. If each generation chooses its human capital optimally, given that of the preceding and succeeding generations, human capital follows a unique rational-expectations path. For moderate substitutability, human capital within each sector oscillates relative to that in other sectors, but aggregate human capital converges to the steady state monotonically.
TL;DR: The model predicts that positive population growth is sufficient to escape the Malthusian trap and the build up of technology is positively related to the stock of human capital.
Abstract: We consider a demoeconomic model where output is produced using physical capital, human capital and technology as inputs. Human capital depends on the number of people and the level of education in the economy. The dynamics of labour, physical capital, education and technology are endogenously determined such as to reflect the interdependence between economic and demographic factors. The longrun path of the economy and in particular the possibility to escape the Malthusian trap crucially depend on technological progress, which provides for economy wide increasing returns to scale. The build up of technology is positively related to the stock of human capital. Our model predicts that positive population growth is sufficient to escape the Malthusian trap.
TL;DR: In this paper, the authors focus on the effect of capital flows on domestic savings, the way in which capital mobility affects the ability to engage in independent monetary policy, and the effectiveness of capital controls.
Abstract: This paper deals with Latin America's experience with capital flows during the last decade and a half. It concentrates on a number of issues of increasing interest among academics and international observers, including the effect of capital inflows on domestic savings, the way in which capital mobility affects the ability to engage in independent monetary policy, and the effectiveness of capital controls. It also addresses a number of policy dilemmas that have become topical in light of the recent East Asian currency crises, including questions related to capital account sustainability, the role of domestic banks in the intermediation of capital inflows, and the feasibility of fixed nominal exchange rates in a world of capital mobility. Latin America's experience with capital mobility should provide insights to scholars interested in other regions of the world. Indeed, during the last few years the Latin American countries have been a laboratory of sorts, where almost every possible approach towards capital mobility has been tried.
TL;DR: In this paper, the authors argue that for a region adopting a technology from elsewhere, an existing stock of (relevant) human capital was essential to the rapid and successful adoption of the technology, but once the technology has been fully assimilated, increments to human capital would not be expected to be important in its further growth.
Abstract: The article argues that for a region adopting a technology from elsewhere, an existing stock of (relevant) human capital was essential to the rapid and successful adoption of the technology. But once the technology has been fully assimilated, increments to human capital would not be expected to be important in its further growth. Thus, Catalan industrialisation was possible because the level of human capital present in industry was enough to adopt and modify new technologies. Human capital stock was mainly the result of past investments in on-the-job training, and children's informal education took place in the workplace rather than the schoolroom. Therefore, the level of human capital present in the workforce was higher than literacy and schooling rates showed. However, evidence is also presented on the low contribution made by human capital to growth rates.
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TL;DR: In this paper, physical investment in UK manufacturing from the viewpoint of individual establishment, i.e., business or plant, was studied from the perspective of the individual establishment using the ARD.
Abstract: This paper studies physical investment in UK manufacturing from the viewpoint of the individual establishment, i.e. business or plant. It uses the new longitudinal database of the Census of Production, the ARD. I construct a sample of 1,752 establishments which survived over 1973-93 and estimate their capital stocks. These survivors accounted for about a third of manufacturing employment. From production function estimates, the neo-classical view that the elasticity of output with respect to capital is equal to capital's share cannot be rejected. Capital intensity varies widely across establishments even in the same SIC80 Class. It is 50% higher in foreign- owned establishments which are also more human capital intensive. Value added per worker is 38% higher in foreign-owned establishments. Human and physical capital intensity differences are a significant determinant of productivity gaps between establishments. Even after allowing for their higher capital intensity, US-owned (but not other foreign-owned) establishments have an additional productivity advantage of between
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