Showing papers on "Capital deepening published in 2008"
TL;DR: In this article, the authors present a model of nonbalanced growth based on differences in factor proportions and capital deepening, which is consistent with an asymptotic equilibrium with a constant interest rate and capital share in national income.
Abstract: We present a model of nonbalanced growth based on differences in factor proportions and capital deepening. Capital deepening increases the relative output of the more capital‐intensive sector but simultaneously induces a reallocation of capital and labor away from that sector. Using a two‐sector general equilibrium model, we show that nonbalanced growth is consistent with an asymptotic equilibrium with a constant interest rate and capital share in national income. For plausible parameter values, the model generates dynamics consistent with U.S. data, in particular, faster growth of employment and slower growth of output in less capital‐intensive sectors, and aggregate behavior consistent with the Kaldor facts.
496 citations
TL;DR: In this article, the authors examined whether cross-listing in the U.S. reduces foreign firms' costs of capital and found that firms with crosslistings on U. S. exchanges experienced a significant decrease in their cost of capital between 70 to 120 basis points.
Abstract: This paper examines whether cross-listing in the U.S. reduces foreign firms' costs of capital. While prior studies show that U.S. cross-listings are associated with substantial increases in firm value, the sources of these valuation effects are not well understood. We estimate cost of capital effects implied by market prices and analyst forecasts, which accounts for changes in growth expectations around cross-listings. We find strong evidence that firms with cross-listings on U.S. exchanges experience a significant decrease in their cost of capital between 70 to 120 basis points. These effects are sustained and still present after the passage of the Sarbanes-Oxley Act. Consistent with the bonding hypothesis, we find smaller cost of capital reductions for firms that cross-list in the over-the-counter market and for exchange-listed firms from countries with stronger home-country institutions. For exchange-traded cross-listings, the reduction in cost of capital accounts for more than half of the increase in value around cross-listings, whereas for the other types of cross-listings the valuation effects are primarily attributable to contemporaneous revisions in growth expectations.
481 citations
TL;DR: In this article, the authors explored the channels linking social spending, human capital, and growth and compared the effects of alternative economic policy interventions, such as improving governance and taming inflation.
336 citations
TL;DR: In this article, the authors explore emerging new theories on both the costs and benefits of capital account liberalization, and suggest how one might adopt a pragmatic approach to the process, concluding that the lack of domestic savings is not the primary constraint on growth in these economies, as implicitly assumed in the benchmark neoclassical framework.
Abstract: Cross-country regressions suggest little connection from foreign capital inflows to more rapid economic growth for developing countries and emerging markets. This suggests that the lack of domestic savings is not the primary constraint on growth in these economies, as implicitly assumed in the benchmark neoclassical framework. We explore emerging new theories on both the costs and benefits of capital account liberalization, and suggest how one might adopt a pragmatic approach to the process.
225 citations
TL;DR: The authors provided a new data set on per capita book production as a proxy for advanced literacy skills, and assessed this relative to other measures, finding that book production per capita is an indicator for more advanced capabilities.
Abstract: We provide a new data set on per capita book production as a proxy for advanced literacy skills, and assess this relative to other measures. While literacy proxies very basic skills, book production per capita is an indicator for more advanced capabilities. Growth theory suggests that human capital formation plays a significant role in creating the ‘wealth of nations.’ This study tests whether human capital formation has an impact on early-modern growth disparities. In contrast to some previous studies which denied the role of human capital as a crucial determinant of long-term growth, we confirm its importance.
183 citations
TL;DR: In this article, the role of guanxi, the Chinese variant of social capital, was investigated using a dataset designed for this purpose, covering 7,500 urban workers and conducted in early 2000.
Abstract: Social capital is considered to play an economic role in labour markets. It may be particularly pertinent in one that is in transition from an administered to a market-oriented system. One factor that may determine success in the underdeveloped Chinese labour market is thus guanxi, the Chinese variant of social capital. With individual-level measures of social capital, we test for the role of guanxi using a dataset designed for this purpose, covering 7,500 urban workers and conducted in early 2000. The evidence is consistent with the basic hypothesis. Both measures of social capital – size of social network and Communist Party membership – have significant and substantial coefficients in the income functions. Social capital can have influence either in an administered system or in one subject to market forces. It appears to do so in both parts of the labour market.
131 citations
TL;DR: In this paper, an unbalanced panel data set spanning eight years around the period of the 1997-1998 Asian financial crisis was used to find a strong positive link between regulatory capital and bank management's risk-taking behavior.
Abstract: Thispaperreportsnewfindingsonthedeterminantsofbankcapitalratios. The results are from an unbalanced panel data set spanning eight years around the period of the 1997-1998 Asian financial crisis. Test results suggest a strong positive link between regulatory capital and bank management's risk-taking behaviour. The risk-based capital standards of the regulators did not have an influence on how regula- tory capital is adjusted by low-capitalized banks, perhaps due to the well-documented banking fragility during the test period. Finally, bank capital decisions seem not to be driven by bank profitability, which finding is inconsistent with developed country literaturethathasforlongstressedtheimportanceofbanks'earningsasdrivingcapital ratios. Although the study focuses only on one developing economy, these findings may help to identify the correlates of bank capital ratios in both developed and devel- oping economies since this topic has received scant attention of researchers. These findings are somewhat consistent with how banks engaging in risky lending across the world could have brought on the 2007-2008 banking liquidity and capital erosion crisis.
107 citations
102 citations
TL;DR: In this paper, the authors provide evidence on the indirect effect of human capital in making private capital investment more attractive, and observe that higher worker skill levels enable higher returns to be extracted from investment in physical capital.
91 citations
TL;DR: In this article, the authors analyzed the industry origins of the American growth resurgence by examining output, input, and productivity growth of 85 component industries for the period 1960 to 2005, and used this detailed industry data to examine trends in particular industry groups such as those that produce information technology (IT) or use IT most intensively and to perform a bottom-up comparison of alternative aggregation methodologies.
Abstract: This paper analyzes the industry origins of the American growth resurgence by examining output, input, and productivity growth of 85 component industries for the period 1960 to 2005. We use this detailed industry data to examine trends in particular industry groups such as those that produce information technology (IT) or use IT most intensively and to perform a ‘bottom-up’ comparison of alternative aggregation methodologies. The data show that while labor productivity growth was strong throughout the full period after 1995, there were important differences between 1995–2000 and 2000–2005. The period 1995–2000, for example, was marked by strong growth in labor input so aggregate output was robust, while labor input and output growth both declined substantially after 2000. IT remained an important source of both capital deepening and total factor productivity growth after 2000, but the contributions were not as large as during the technology boom of the late 1990s. We also show that the production...
89 citations
TL;DR: In this article, the authors model in an endogenous growth set-up the hypotheses that the expansion of market activities weakens social capital formation and that firms can invest in formal mechanisms of control and enforcement to substitute for social capital (trust, work ethics, honesty).
Abstract: We model in an endogenous growth set-up the hypotheses that the expansion of market activities weakens social capital formation and that firms can invest in formal mechanisms of control and enforcement to substitute for social capital (trust, work ethics, honesty). The model shows that the economy tends to grow faster when it is relatively poorer in social capital and that perpetual growth can be consistent with the progressive erosion of social capital. These results may help to reconcile Putnam's claim that social capital has declined in the U.S. with the satisfactory growth performance of the U.S. over the same period.
TL;DR: This article analyzed the effect of human capital investment, infrastructure, and the business environment on the export of services and goods from 25 countries from 1989 to 2003 and found that human capital did have a significant effect on the exports of goods and services.
Abstract: and Key Results
With the rise of the global service economy, and understanding of the export competitiveness of nations is critical for managers seeking offshore export locations, and for government policy makers who wish to bolster the attractiveness of their nation as an exporting location. Services globalization — reflected in the growth of outsourcing and offshoring — calls into question the role of human capital investment, whose effect in past studies has been mixed. Drawing on human capital theory, we developed three propositions and analyzed the effect of human capital investment, infrastructure, and the business environment on the export of services and goods from 25 countries from 1989 to 2003.
Human capital did have a significant effect on the exports of goods and services. However, contrary to the expectations of human capital theory, human capital was not significantly more important for services exports than for goods exports. In line with expectations of human capital theory, human capital investment had a greater effect in emerging Asia than in developed countries. These findings have important implications for managers and future research.
TL;DR: In this article, a fresh look at the analysis of labour market dynamics and argues that capital accumulation plays a fundamental role in shaping unemployment movements, and finds that capital stock is a major determinant of unemployment in the Nordic countries.
Abstract: This paper takes a fresh look at the analysis of labour market dynamics and argues that capital accumulation plays a fundamental role in shaping unemployment movements. This role has generally been examined by considering indirect transmission channels of the capital stock effects, i.e. using variables like interest rates or investment ratios in the estimation of single-equation unemployment rate models. Here we advocate a different approach. We directly estimate the effects of capital stock in the labour market by applying the chain reaction theory of unemployment, and we find that capital stock is a major determinant of unemployment in the Nordic countries. In particular, the different unemployment experiences of these economies derive from the temporary (albeit prolonged) negative shocks to capital stock growth in Denmark and Sweden, and the permanent downturn of capital stock growth in Finland. We are thus able to explain why the crisis of the early 1990s had a more acute impact in Finland than in its twin economy, Sweden.
TL;DR: In this article, the effects of population growth on per-capita income growth within a Romerian (1990)-type endogenous growth model with human capital accumulation were investigated. And the authors found that both the growth rate and the level of real per-Capita income are independent of population size, depending on the size of the degree of altruism of agents towards future generations.
TL;DR: In this article, the authors investigated the relationship between human capital and economic growth in Pakistan with aggregate time series data and found that human capital is estimated to have accounted for just under one-fifth of the increase in Pakistan's GDP per head.
Abstract: This paper investigates the relationship between human capital and economic growth in Pakistan with aggregate time series data. Estimated with the Johansen (1991) approach, the fitted model indicates a critical role for human capital in boosting the economy’s capacity to absorb world technical progress. Much higher returns, including spillovers, to secondary schooling in Pakistan than in OECD economies is consistent with very substantial education under-investment in Pakistan. Similarly, extremely large returns to health spending compare very favorably with industrial investment. Human capital is estimated to have accounted for just under one-fifth of the increase in Pakistan’s GDP per head. Since the 1990s, the impact of deficient human capital policies is shown by the negative contribution to economic growth.
Book•
10 Oct 2008
TL;DR: Theoretical models of human capital and economic growth have been studied in the literature as mentioned in this paper, including threshold effects, multiple equilibria, and nonlinearities in Human Capital and Economic Growth.
Abstract: PART I Introduction 1 Introduction to Human Capital and Economic 3 Growth 2 The Concept of Human Capital: A Brief 10 Historical Review PARTII Theoretical Research on Human Capital and Economic Growth 3 Theoretical Models of Human Capital and 27 Economic Growth 4 Human Capital and Endogenous Models of 53 Economic Growth 5 Threshold Effects, Multiple Equilibria, and 84 Nonlinearities in Human Capital and Economic Growth PARTIII The Empirics of Human Capital and Economic Growth 6 Empirical Studies on Human Capital and 107 Economic Growth 7 Human Capital and Economic Growth: Linear 156 Specifications 8 A Primer on Nonparametric Methods and Their 172 Application to Research in Human Capital and Economic Growth 9 Human Capital and Economic Growth: 193 Nonlinear Specifications Appendix: Nonparametric Methods 211 Glossary 217 Bibliography 221
TL;DR: In this paper, the authors used the Kumar and Russell [American Economic Review (2002) Vol. 92, pp. 527-548] growth-accounting procedure to examine cross-country growth during the 1990s.
Abstract: In this paper we use the Kumar and Russell [American Economic Review (2002) Vol. 92, pp. 527–548] growth-accounting procedure to examine cross-country growth during the 1990s. Using a data set comprising developed, newly industrialized, developing and transitional economies, we decompose the growth of output per worker into components attributable to technological catch-up, technological change and capital accumulation. In contrast to the study by Kumar and Russell, which concludes that capital deepening is the major force of growth and change in the world income per worker distribution over the 1965–90 period, our analysis shows that, during the 1990s, the major force in the further divergence of the rich and the poor is due to technological change, whereas capital accumulation plays a lesser and opposite role. Finally, although on average we find that transitional economies perform similar to the rest of the world, the procedure is able to discover some interesting patterns within the set of transitional countries.
18 Dec 2008
TL;DR: In this article, the interaction between economic growth in the sense of human capital accumulation and the dynamics of inequalities is discussed, where individuals improve their human capital both to improve their wages and to avoid potential competition with less skilled individuals.
Abstract: This article discusses the interaction between economic growth in the sense of human capital accumulation and the dynamics of inequalities. We use a mean-field game framework in which individuals improve their human capital both to improve their wages and to avoid potential competition with less skilled individuals. Our contribution is twofold. First, we exhibit a mechanism in which competition between a continuum of people regarding human capital accumulation lead to growth. Second, our model highlights the importance of Pareto distributions to describe inequalities since power laws appear naturally as explicit solutions of our problem.
TL;DR: In this paper, a large set of firm-level panel data for China's industrial enterprises is used to identify three channels of technical change, each associated with a different pattern of factor bias and underlying firm objective.
TL;DR: In this paper, the authors present a simple model of that process and then test its implications, finding little evidence to suggest that social capital is correlated with either area growth or rates of out-migration.
Abstract: Social capital is often place-specific while schooling is portable, so the prospect of migration may reduce the returns to social capital and increase the returns to schooling. If social capital matters for urban success, it is possible that an area can get caught in a bad equilibrium where the prospect of out-migration reduces social capital investment and a lack of social capital investment makes out-migration more appealing. We present a simple model of that process and then test its implications. We find little evidence to suggest that social capital is correlated with either area growth or rates of out-migration. We do, however, find significant differences in the returns to human capital across space, and a significant pattern of skilled people disproportionately leaving declining areas. For people in declining areas, the prospect of out migration may increase the returns to investment in human capital, but it does not seem to impact investment in social capital.
TL;DR: Using an alternative estimate of the stock of human capital, based on judson (2002), this paper found evidence that the two major views on the role of human resources in economic development by Lucas (1988) and Romer (1990) coexist and are by no means mutually exclusive.
Abstract: There is a general consensus that human capital is a major factor behind long-run economic growth. Yet, on a macro level, the empirical results do not always seem to concur with this view. To explain this gap between theory and empirics, more focus has been laid on measurement error and data quality. Using an alternative estimate of the stock of human capital, based on Judson (2002), we find evidence that the two major views on the role of human capital in economic development by Lucas (1988) and Romer (1990) coexist and are by no means mutually exclusive. Using a Johansen cointegration test, we find that in India and Indonesia the level of human capital is cointegrated with the level of aggregate income during the whole 20th century, which confirms the theory of Lucas (1988). In Japan, however, the Lucasian approach can be verified only for the first half of the century, while after 1950 there is cointegration between the growth rate of aggregate income and the level of human capital, which is in line with Romer's view.
TL;DR: In this article, the effects of capital restrictions on growth support capital account liberalization in developed and developing countries, especially for developed countries, and they show that trade with developed countries and FDI inflows are substitutes in developing countries.
Abstract: New empirical estimates of the effects of capital restrictions on growth support capital account liberalization, especially for developed countries. Capital restrictions reduce the benefits of foreign direct investment (FDI) on growth in developing countries. Estimation results for long-term capital flows demonstrate that countries with higher flows grow faster, challenging the belief that countries must attain a threshold level of development or human capital to benefit from capital inflows. Moreover, findings show that trade with developed countries and FDI inflows are substitutes in developing countries. Overall, the results support capital account liberalization in developed and developing countries.
TL;DR: In this paper, the authors estimate the contribution of aggregate input growth and total factor productivity (TFP) growth to income growth across the states of the United States from 1840 through 2000, a period that is longer than typical for the existing literature.
Abstract: This paper creates a new data set on the physical capital at the state level for the United States from 1840 through 2000. We combine these new data with state level human capital and income data to do standard growth accounting exercises and to estimate the contribution of aggregate input growth and total factor productivity (TFP) growth to income growth across the states of the United States from 1840 through 2000, a period that is longer than typical for the existing literature. We find that that 61% of output growth from 1840-2000 is accounted for by input growth. We conduct a variance decomposition to examine the role that aggregate input growth and TFP growth have in explaining the cross-sectional variance of income growth across states. As the results are sensitive to the treatment of the observed correlation between aggregate input growth and TFP growth, we construct plausible upper and lower bounds for the fraction of the variance in output that can be explained by variation in TFP and aggregate inputs. For the 1840 through 2000 period, we find that a the upper bound for TFP growth is 93% of the variance of income growth and the plausible upper bound for aggregate inputs is 82%. We find it interesting, however, that at the state level where the unit of observation is more homogenous, TFP continues to be an important determinant of the growth and the variation in output per worker. In addition, as our data is across states of the United States instead of across countries, one would expect less institutional heterogeneity in this study than in those using cross-country comparisons.
TL;DR: In this paper, the authors examined the effects of mortality decline on fertility and human capital investment decision of parents taking into account the uncertainty about child survival and proposed a model, where parents decide on their fertility before the uncertainty is realized, but they choose to invest only in human capital of their surviving children.
Abstract: I examine the effects of mortality decline on fertility and human capital investment decision of parents taking into account the uncertainty about child survival. I propose a model, where parents decide on their fertility before the uncertainty is realized, but they choose to invest only in human capital of their surviving children. The model implies a positive relationship between mortality and fertility and a negative one between mortality and educational investment. It has been argued elsewhere that as, in reality, most of the mortality decline occurred in infancy, it should not affect the human capital investment decision, which comes later in life. Thus, increased survival chances should not promote growth by raising the human capital investment. This paper argues the contrary and proposes a mechanism where mortality decline at any age before the teen years can promote growth by raising human capital investment regardless of the timing of the educational investment.
01 Jan 2008
TL;DR: Kjelland et al. as discussed by the authors argued that individuals utilize higher education to signal a broad set of inherent productivity enhancing characteristics, which are unobserved by employers, and argued that several past studies have focused too narrowly on measures of inherent intelligence as representative of an individual's signaled productivity-enhancing characteristics and that estimates of the signaling effect might have been downwardly biased.
Abstract: This study, in concert with previous studies, attempts to separate out the independent effects of the signaling and human capital mechanisms, arguing that individuals utilize higher education to signal a broad set of inherent productivity enhancing characteristics, which are unobserved by employers. I argue that several past studies, namely Chevalier (2004), have focused too narrowly on measures of inherent intelligence as representative of an individual’s signaled productivity-enhancing characteristics and that estimates of the signaling effect might have been downwardly biased as a result. This article is available in The Park Place Economist: http://digitalcommons.iwu.edu/parkplace/vol16/iss1/14 The Park Place Economist, Volume XVI 70 Jim Kjelland Economic Returns to Higher Education: Signaling v. Human Capital Theory An Analysis of Competing Theories
01 Jan 2008
TL;DR: The empirical literature on the link between human capital and growth has changed course several times over the last decade as discussed by the authors, and the evidence now seems to indicate that educational expansion does contribute to output growth.
Abstract: Recent theoretical contributions to the growth literature emphasize the role of human capital in the process of economic growth. Meanwhile, the empirical literature on the link between human capital and growth has changed course several times over the last decade. On balance, the evidence now seems to indicate that educational expansion does contribute to output growth. There also appear to be grounds for thinking that human capital has a substantial impact on technological catch-up, possibly through improving a country’s capacity to adopt new technologies. However, the literature is subject to many methodological and conceptual weaknesses, such as the inadequacy of empirical human capital proxies and reverse causality. Therefore, these conclusions have to be considered preliminary and fragile.
TL;DR: In this article, the authors provided empirical evidence on the effects of inflation on capital flight flows in the post-war period and tested the hypothesis that inflation has a positive differential effect on the capital flight in the UK.
Abstract: This article provides empirical evidence on the effects of inflation on postwar capital flight flows. It tests the hypothesis that inflation has a positive differential effect on capital flight in ...
TL;DR: In the spirit of T. W. Schultz's contributions to the theory and measurement of human capital, the authors discusses the dimensions of human human capital and the technologies used for its accumulation and maintenance.
Abstract: In the spirit of T. W. Schultz's contributions to the theory and measurement of human capital, this article discusses the dimensions of human capital, and the technologies used for its accumulation and maintenance. The article emphasizes the role of health as a dimension of human capital that influences the efficiency of acquisition and maintenance of cognitive skills, and the relationship between worker productivity and depreciation of cognitive skills over the life cycle.
TL;DR: In this article, the authors explored the possible transmission channels of social capital to economic growth for a sample of some developed and developing countries during the period 1980-2000, using a simultaneous equation model, and found that an improvement of the social infrastructure with high levels of trust and cooperation between individuals not only has a direct but also an indirect effect on economic growth through the development of institutions in the economy.
Abstract: This paper explores the possible transmission channels of social capital to economic growth for a sample of some developed and developing countries during the period 1980–2000, using a simultaneous equation model. The main results of this paper are, first, the level of trust as a measure of social capital and growth are significantly and positively correlated; second, a high level of trust also has an indirect effect on economic activity through its effect on institutional development; third, such results are found to be robust statistically with the extreme bound analysis (EBA). It corroborates the fact that an improvement of the social infrastructure with high levels of trust and cooperation between individuals not only has a direct but also an indirect effect on economic growth through the development of institutions in the economy.
TL;DR: In this article, the authors show how capital movements conform surprisingly well to the predictions of a neoclassical model with credit constraints, and they find qualitative and quantitative evidence that supports these predictions.