Capital deepening

About: Capital deepening is a research topic. Over the lifetime, 5203 publications have been published within this topic receiving 230297 citations.

Is Poland the Next Spain

Abstract: We revisit Western Europe's record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catchup at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East's income gap is quite small. Hence, the East seems to have only one real margin to exploit: the within industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe's experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.

Social capital and economic growth: empirical investigations on the transmission channels

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.

Financial Liberalization and Economic Growth: Lessons from the South African Experience

Abstract: Following liberalization in South Africa, uncertainty on the part of foreign investors due to lack of a credible macroeconomic framework led to increased volatility of capital flows; characterized by huge capital inflows and subsequent capital flight. Post-liberalization Foreign Portfolio Investments had no positive effect on economic growth. In addition, increased post- liberalization stock market turnover had a negative effect on economic growth. In contrast to this situation, evidence shows that foreign portfolio investment and increased turnover contributed positively to economic growth in a more controlled pre-1994 South African economy. This study aims to show that liberalization of the capital account is necessary but not sufficient for economic growth. Instead, countries need to adopt and implement credible macroeconomic policies meant to stabilize foreign capital flows in order for them to benefit fully from liberalization.

Capital Market Development

Abstract: Local capital market development is a key component of the Inter-American Development Bank (IDB) private sector development strategy. Beginning in the late 80’s, Latin American countries adopted policies to foster economic growth through, among others, capital accumulation. The replacement of the pay-as-you-go pension system by a privately operated funded pension system was adopted in most countries, albeit with different transition mechanisms, to increase domestic private savings. The successive sudden stops of international funds to the region during the 90’s jeopardized its development and stability, and made the need for an internal generation of resources even more evident. The size and liquidity of the private pension funds as well as of other institutional investors has increased exponentially since their creation. However, this pool of capital has up until now been almost exclusively concentrated in the acquisition of government related instruments and only a fraction of these resources has been channelled effectively to productive purposes due in part to a lack of suitable instruments.