Showing papers on "Capital deepening published in 2013"
TL;DR: This paper showed that the allocation of capital flows across developing countries is the opposite of this prediction: capital does not flow more to countries that invest and grow more, and the solution to the allocation puzzle lies at the nexus between growth, saving and international reserve accumulation.
Abstract: The textbook neoclassical growth model predicts that countries with faster productivity growth should invest more and attract more foreign capital. We show that the allocation of capital flows across developing countries is the opposite of this prediction: capital does not flow more to countries that invest and grow more. We call this puzzle the “allocation puzzle”. Using a wedge analysis, we find that the pattern of capital flows is driven by national saving: the allocation puzzle is a saving puzzle. Further disaggregation of capital flows reveals that the allocation puzzle is also related to the pattern of accumulation of international reserves. The solution to the “allocation puzzle”, thus, lies at the nexus between growth, saving, and international reserve accumulation. We conclude with a discussion of some possible avenues for research.
300 citations
TL;DR: In this paper, the authors analyzed the determinants of export upgrading using a cross-country panel dataset over the 1992-2006 period and found that the export sophistication of countries is enhanced by capital deepening, engagement in knowledge creation, transfers via investment in education and R&D and foreign direct investment and imports.
133 citations
TL;DR: In this paper, the authors investigated how patent protection affects economic growth in an endogenous growth model where both innovation and capital accumulation are the driving forces of economic growth, and they found that patent protection can accelerate innovation but discourage capital accumulation.
Abstract: In this paper, we investigate how strengthening patent protection affects economic growth in an endogenous growth model where both innovation and capital accumulation are the driving forces of economic growth. In this model, stronger patent protection raises the profit flow obtained by innovation but reduces the factor demand for capital. This process accelerates innovation but discourages capital accumulation, and because of the negative effect on economic growth through reducing capital accumulation, strengthening patent protection may then impede economic growth. This result contrasts with earlier studies where innovation is the sole driving force for economic growth. Moreover, in an open economy model where technologies are transferred and capital is imported from abroad, the strictest protection of patents enhances technology adoption from abroad but impedes capital accumulation, and thus, the relation derived between patent protection and output can be nonmonotone. In terms of implications, these findings may be able to partly explain the complex relation found by some empirical studies in this area.
111 citations
TL;DR: Human capital theory posits that individuals increase their labor market returns through investments in education and training as discussed by the authors, and this concept has been extensively studied across several disciplines including finance, economics, and psychology.
Abstract: Human capital theory posits that individuals increase their labor market returns through investments in education and training. This concept has been studied extensively across several disciplines....
75 citations
TL;DR: In this article, the substitutability between energy and capital in the manufacturing sectors of ten OECD countries since 1980 was investigated by applying a cost function approach that has been widely used to analyze industrial energy demand.
66 citations
TL;DR: In this article, the authors studied the relationship between capital ratio and bank efficiency for Chinese banks over the period 2004−2009, taking advantage of the profound regulatory changes in capital requirements that occurred during this period to measure the exogenous impact of an increase in the capital ratio on banks' cost efficiency.
Abstract: This paper contributes to the debate on the effect of capital requirements on bank efficiency. We study the relation between capital ratio and bank efficiency for Chinese banks over the period 2004−2009, taking advantage of the profound regulatory changes in capital requirements that occurred during this period to measure the exogenous impact of an increase in the capital ratio on banks’ cost efficiency. We find that such an increase has a positive effect on cost efficiency, the size of which depends to an extent on the bank’s ownership type. Our results therefore suggest that capital requirements can improve bank efficiency.
63 citations
TL;DR: In this article, the authors used new international comparable data on intangible capital investment by business within a panel analysis between 1998 and 2005 in an EU country sample, and found a positive and significant relationship between investment in intangible capital and labor productivity growth.
Abstract: Using new international comparable data on intangible capital investment by business within a panel analysis between 1998 and 2005 in an EU country sample, a positive and significant relationship between intangible capital investment and labor productivity growth is detected. This relationship proves to be robust to a range of alterations. The empirical analysis confirms previous findings that the inclusion of business intangible capital investment in the asset boundary of the national accounting framework increases the rate of change of output per hour worked more rapidly. In addition, intangible capital is able to explain a significant portion of the unexplained international variance in labor productivity growth, and becomes a dominant source of growth.
63 citations
TL;DR: Karcher et al. as discussed by the authors found that political variables have stronger effects on capital account policy than previously recognized, while macroeconomic fundamentals are less important than previous research suggests, and that the most commonly used measure of capital account openness, Chinn and Ito's (2002) Kaopen index, suffers from systematic measurement error.
Abstract: Karcher, Sebastian and David A Steinberg (2012) Assessing the Causes of Capital Account Liberalization: How Measurement Matters International Studies Quarterly, doi: 101111/isqu12001 © 2012 International Studies Association
Why do countries open their economies to global capital markets? A number of recent articles have found that two types of factors encourage politicians to liberalize their capital accounts: strong macroeconomic fundamentals and political pressure from proponents of open capital markets However, these conclusions need to be re-evaluated because the most commonly used measure of capital account openness, Chinn and Ito’s (2002) Kaopen index, suffers from systematic measurement error We modify the Chinn–Ito variable and replicate two studies (Brooks and Kurtz 2007; Chwieroth 2007) to demonstrate that our improved measure overturns some prior findings Some political variables have stronger effects on capital account policy than previously recognized, while macroeconomic fundamentals are less important than previous research suggests
62 citations
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TL;DR: In this paper, the authors provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in the recent decades, showing that external repression revenues in EMEs declined substantially in the 2000's compared with the 1980's.
Abstract: In this paper, we provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in the recent decades. Liberalization of capital outflow controls can allow emerging market economies (EMEs) to reduce net capital inflow (NKI) pressures, but may cost their governments the fiscal revenues that external financial repression generates. Our results indicate that external repression revenues in EMEs declined substantially in the 2000's compared with the 1980's. In line with this decline in external repression revenues and their growth accelerations in 2000's, concerns related to net capital inflows took predominance over fiscal concerns in the decisions to liberalize capital outflow controls. Emerging markets facing high volatility in net capital inflows and higher balance sheet exposures liberalized outflows less. Countries eased outflows more in response to higher net capital inflows, higher appreciation pressures in the exchange market, higher real exchange rate volatility and greater accumulation of reserves.
60 citations
TL;DR: In this article, the authors developed a scale-invariant Schumpeterian growth model with endogenous fertility and human capital accumulation and derived comparative statics of the equilibrium growth rates with respect to structural parameters.
Abstract: This study develops a scale-invariant Schumpeterian growth model with endogenous fertility and human capital accumulation. The model features two engines of long-run economic growth: R&D-based innovation and human capital accumulation. One novelty of this study is endogenous fertility, which negatively affects the growth rate of human capital. Given this growth-theoretic framework, we characterize the dynamics of the model and derive comparative statics of the equilibrium growth rates with respect to structural parameters. As for policy implications, we analyze how patent policy affects economic growth through technological progress, human capital accumulation, and endogenous fertility. In summary, we find that strengthening patent protection has (a) a positive effect on technological progress, (b) a negative effect on human capital accumulation through a higher rate of fertility, and (c) an ambiguous overall effect on economic growth.
58 citations
TL;DR: In this paper, the impact of human capital on economic growth in Sudan for the period 1982-2009 by using a simultaneous equation model that links human capital i.e. school attainment; and investment in education and health to economic growth, total productivity, foreign direct investment, and human development index.
Abstract: This paper empirically investigates the impact of human capital on economic growth in Sudan for the period 1982-2009 by using a simultaneous equation model that links human capital i.e. school attainment; and investment in education and health to economic growth, total productivity, foreign direct investment, and human development index. Based on three-stage least squares technique, the empirical results of the paper show that quality of the education has a determinant role in the economic growth; health quality factor has a positive impact on economic growth as expected and total factor productivity which mainly represents the state of technology has adverse effect on economic growth and human development due to the obsolete and old fashion technology.
TL;DR: This paper examined the causal relationship between capital formation and economic growth in Sub-Saharan African countries using panel cointegration and causality testing techniques and found that causality is bi-directional, suggesting that higher economic growth leads to higher capital formation.
Abstract: This paper examines the causal relationship between capital formation and economic growth in Sub-Saharan African countries using recent panel cointegration and causality testing techniques. We find that causality is bi-directional, suggesting that higher economic growth leads to higher capital formation and that in turn, increases in capital formation results in higher economic growth. These results hold irrespective of whether capital formation is measured with private fixed capital formation or by gross capital formation.
TL;DR: This paper examined input and productivity dynamics of manufacturing firms in the period leading to and following export market entry, and examined three possible explanations for the observed productivity gap between exporting and non-exporting firms.
TL;DR: In this paper, the authors analyzed whether remoteness from economic activity has a negative effect on human capital accumulation and, consequently, on economic development, making use of micro-data, they proved that remotness from economic activities has contributed to explain the divergences in the level of education observed across Spanish provinces over the last 50 years.
Abstract: Human capital endowment is one of the main factors influencing the level of development of a region. This paper analyses whether remoteness from economic activity has a negative effect on human capital accumulation and, consequently, on economic development. Making use of microdata this research proves that remoteness from economic activity has contributed to explain the divergences in the level of education observed across Spanish provinces over the last 50 years. The effect is significant even when controlling for the improvement of education supply. Nonetheless, the accessibility effect has been petering out since the 1960s due to the decreasing barriers to mobility.
TL;DR: This article provided a theoretical justification of this result and showed how wage curves of input-output matrices with small non-dominant eigenvalues become quasi-linear with some numeraires.
Abstract: The Cambridge debate showed that an aggregation of capital is not possible in general. A recent investigation has found one example for reswitching and several for reverse capital deepening, but the paradoxes appear to be infrequent. The paper provides a theoretical justification of this result and shows how wage curves of input–output matrices with small non-dominant eigenvalues become quasi-linear with some numeraires. Large random systems lead to the genesis of such states. Approximate surrogate production functions then seem possible. A family of economic systems with constant capital composition allows construction of a surrogate production function. Copyright , Oxford University Press.
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TL;DR: The authors assesses the implications of Chinese capital account liberalization for capital flows and finds that capital controls significantly dampen cross-border portfolio asset holdings, which may trigger net portfolio outflows.
Abstract: This paper assesses the implications of Chinese capital account liberalization for capital flows. Stylized facts from capital account liberalization in advanced and large emerging market economies illustrate that capital account liberalization has historically generated large gross capital in- and outflows, but the direction of net flows has depended on many factors. An econometric portfolio allocation model finds that capital controls significantly dampen cross-border portfolio asset holdings. The model also suggests that capital account liberalization in China may trigger net portfolio outflows as large domestic savings seek to diversify abroad.
Journal Article•
TL;DR: In this paper, the authors investigated the impact of capital formation on economic growth in Nigeria and found that gross fixed capital formation and economic growth are integrated of order zero (I(0), Johasen co integration test was employed to determine the order of integration while erro correction model was employed in determining the speed of adjustment to equilibrium.
Abstract: The paper investigated the impact of capital formation on economic growth in Nigeria. The data were collected from Central Bank of Nigeria (CBN) statistical bulletin (2011).To analyze the impact of capital formation, stock market capitalization, inflation rate and interest rate on economic growth, the study employed Ordinary least square (OLS) technique. To test for the properties of time series, phillip-perron test was used to determine the stationarity of the variables and it was discovered that gross fixed capital formation and economic growth are integrated of order zero (I(0), Johasen co integration test was employed to determine the order of integration while erro correction model was employed to determine the speed of adjustment to equilibrium. The empirical findings suggest that capital formation has positive and significant impact on economic growth in Nigeria for the period under review this result corroborate the findings of Bakare (2011), Orji and Mba (2010). Stock market also showed a positive impact, while both inflation rate and interest rate has a negative impact on economic growth in Nigeria for the period under review but the impact is statistically insignificant. The result further shows a long run relationship between capital formation and economic growth in Nigeria for the period under review. Therefore emphasis should be place on accumulating capital in Nigeria as this will accelerate growth and development in Nigerian economy. The Nigerian stock market should be deepened more to enhance their contribution to the growth of the domestic economy. Key Word : Capital Formation, Economic Growth, Inflation, Interest rate and stock market capitalization.
TL;DR: In this article, the authors examined the relationship between human capital and economic growth by using a cross-sectional sample of 106 countries to calculate an average over the period 2002-08.
Abstract: The study examines the relationship between human capital and economic growth by using a cross sectional sample of 106 countries to calculate an average over the period 2002–08. Sensitivity analysis on the core model found that the results are robust in terms of inclusion of relevant variables. However, the returns of human capital vary with countries having different income levels. The study found that the low-income countries can get higher returns than the other countries in case of investing in human capital. The study also tested the hypotheses of unconditional and conditional income convergence across nations. The results indicate that human capital either resists income divergence across nations or supports convergence.
TL;DR: The importance of human capital formation concept on economic growth cannot be over emphasized and have been the fulcrum of aid and assistance by international agencies and developed countr... as mentioned in this paper.
Abstract: The importance of human capital formation concept on economic growth cannot be over emphasized and have been the fulcrum of aid and assistance by international agencies and developed countr...
TL;DR: The authors examined the behavior of capital controls in a large number of countries over the period 1995-2011 and found that capital controls are remarkably acyclical, that is, the tightening of restrictions on cross-border capital flows during booms and the relaxation thereof during recessions.
Abstract: A growing recent theoretical literature advocates the use of prudential capital control policy, that is, the tightening of restrictions on cross-border capital flows during booms and the relaxation thereof during recessions. We examine the behavior of capital controls in a large number of countries over the period 1995-2011. We find that capital controls are remarkably acyclical. Boom-bust episodes in output, the current account, or the real exchange rate are associated with virtually no movements in capital controls. These results are robust to decomposing boom-bust episodes along a number of dimensions, including the level of development, the level of external indebtedness, or the exchange-rate regime. We also document a near complete acyclicality of capital controls during the Great Contraction of 2007-2009.
01 Jan 2013
TL;DR: In this article, the authors tried to analyze the labour productivity effects of health capital in Nigeria and found that health capital investment is a significant determinant of labour productivity, while the null hypothesis of an insignificant impact of health investment on labour productivity in Nigeria is vehemently invalidated on the basis of a significant Wald coefficient.
Abstract: This paper attempts to analyze the labour productivity effects of health capital in Nigeria. The GMM methodology was adopted in the estimation having tested for unit root and possible co-integration. We find that health capital investment is a significant determinant of labour productivity. Evident from the hypotheses the null hypothesis of an insignificant impact of health capital investment on labour productivity in Nigeria is vehemently invalidated on the basis of a significant Wald coefficient. The analysis indicates that health capital investment enhances productivity of the labour force. Given that Nigeria is a highly labour-intensive economy, importance must be accorded to having a healthier workforce in order to maximize productivity. Another essential finding in the study lies in the statistical significance of the education-labour and health capital-labour interaction terms. The Nigerian government has to build capacity through investment in education in order to enhance productivity of the labour force. This would protect the economy from further negative trends in productivity growth.
01 Jan 2013
TL;DR: In this article, the importance of human capital in determining the interstate differences in labour productivity and its growth in India was analyzed and the impact of human-capability differences on the growth of employment for a cross section of Indian states for the period 2003-2007.
Abstract: This chapter analyses the importance of human capital in determining the interstate differences in labour productivity and its growth in India. The chapter also examines the impact of human capital differences on the growth of employment for a cross section of Indian states for the period 2003–2007. It argues that the current technology is human capital and knowledge intensive and cannot be used in the absence of skill development. Due to the presence of skill bias in the new technology, persons with less education would become victims. The panel model results of generalised least squares using cross-sectional weights show that after controlling for other determinants, variables representing human capital emerge significant determinants of productivity. Furthermore, higher enrolments in high schools contribute not only to higher labour productivity but also to higher growth in productivity. In addition, states that have higher high school enrolment rates have been enjoying higher growth rates of employment. On the whole, the results presented show strong skill bias in productivity and employment growths across states.
TL;DR: In this article, the authors present and estimate a unified model where both human capital investment and job search are endogenized to quantify the relative contributions of each mechanism to life cycle earnings growth.
TL;DR: In this paper, a translog production function with third-order terms was estimated for the 50 Spanish provinces in the period 1985-2006, showing the existence of complementarity relationships between private physical and human capital.
TL;DR: In this article, links between social capital, human capital, and product imitation are studied in an overlapping generations model of endogenous growth where the key benefit of social capital is to promote imitation.
TL;DR: This paper explored how the economic incentives generated by these dislocations translated, through the political system, into choices about openness to foreign capital and financial integration, which brought about important changes in the structure of the economy and distribution of income in nations across the world.
Abstract: This paper is a first attempt to garner the theory and evidence on the political economy of the first wave of financial liberalisation during the nineteenth and early twentieth century, and of its demise after World War I. Not everyone gained from the process of globalisation (of trade, labour, and finance), which brought about important changes in the structure of the economy and the distribution of income in nations across the world. This paper explores how the economic incentives generated by these dislocations translated, through the political system, into choices about openness to foreign capital and financial integration. The period before World War I is remarkable by the almost absence of restrictions on cross-border capital flows, which may explain the little attention it has received in the historical literature, compared to the extensive study of trade protectionism in this period. After the War, many countries experimented with capital controls which varied in nature and intensity and were intensified during the Depression. Despite the attempt made here to reconcile these stylized facts to models of political economy, the analysis requires a better empirical foundation and some suggestions for further research are also proposed.
TL;DR: In this paper, the authors investigated the impact of health capital disaggregated by gender on economic growth in a sample of 210 countries over the period 1990 to 2008, and found that health capital does not have a robust and significant effect on economic development unless through their interactions with health expenditure and education.
Abstract: Investigating the impact of health capital disaggregated by gender on economic growth in a sample of 210 countries over the period 1990 to 2008, this study suggests that the influence of health capital across countries cannot be generalized. The results for the full sample indicate that health capital does not have a robust and significant effect on economic growth unless through their interactions with health expenditure and education. The results disaggregated by income group reveal that health capital has a positive robust influence on economic growth in high and upper middle income economies. In low and low middle income economies, health capital gains statistical significance only through their interaction with education and health expenditure. Increased fertility rates act to reduce the influence of health capital on economic growth.
TL;DR: In this paper, the authors examined the impact of capital market on the growth of the Nigerian economy under a democratic rule and found that despite the popular belief that democracy promotes investmentsfriendly environment, the Nigerian capital market seems not to have lived up to expectation in terms of its contribution to economic growth.
Abstract: This study seeks to examine the impact of capital market on the growth of the Nigerian economy under a democratic rule. Despite the popular belief that democracy promotes investmentsfriendly environment, the Nigerian capital market seems not to have lived up to expectation in terms of its contribution to economic growth. The study relies on time series data, multivariate regression method was used to analyze the data. The result shows that while total market capitalization and all share indexes exert positive influence on the GDP growth rate, the total value of stock has a negative effect on the GDP growth rate, and none is significant. The study therefore recommends that government should depict concerted effort and sincerity of purpose in the capital market development.
TL;DR: In this paper, the authors examined three important adjustments channels to dampen the detrimental effects of ageing: investing abroad, endogenous human capital formation and increasing the retirement age, and found that the latter has a relatively mild effect.
Abstract: Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged agents with assets accumulated for retirement. This paper addresses three important adjustments channels to dampen these detrimental effects of ageing: investing abroad, endogenous human capital formation and increasing the retirement age. Although non of these suggestions is new in itself, we examine their effects jointly in one coherent model. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points.
TL;DR: In this paper, the authors used a new data set on physical and human capital in seven Central and East European countries for the period 1920-2006 to calculate their effect on economic growth.
Abstract: Central and Eastern Europe is a region with widely divergent development paths. Until World War II, these countries experienced comparable growth patterns. Whereas Austria and West Germany remained part of the capitalist West and underwent periods of rapid growth, other countries, under state socialist regimes, experienced, on average, far lower growth rates. The lack of data, however, often limits the possibilities of a detailed, quantitative analysis. In this paper, we use a new data set on physical and human capital in seven Central and East European countries for the period 1920-2006 to calculate their effect on economic growth. In addition, we analyze the effect of including the quality of education in human capital. This allows us to perform a growth accounting analysis with the several production factors for Central Europe between 1920 and the present. The difference in growth path across countries is partly explained by differences in technical efficiency.