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Capital deepening

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


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Journal ArticleDOI
TL;DR: In this paper, the authors add intangible capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth.
Abstract: Published macroeconomic data traditionally exclude most intangible investment from measured GDP. This situation is beginning to change, but our estimates suggest that as much as $800 billion is still excluded from U.S. published data (as of 2003), and that this leads to the exclusion of more than $3 trillion of business intangible capital stock. To assess the importance of this omission, we add intangible capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth. The rate of change of output per worker increases more rapidly when intangibles are counted as capital, and capital deepening becomes the unambiguously dominant source of growth in labor productivity. The role of multifactor productivity is correspondingly diminished, and labor's income share is found to have decreased significantly over the last 50 years.

972 citations

Posted Content
TL;DR: In this article, the authors investigate the relative importance of financial and human capital exploiting the variation provided by intergenerational links, and find that young men's own financial assets exert a statistically significant but quantitatively modest effect on the transition from a wage and salary job to self-employment.
Abstract: The environment for business creation is central to economic policy, as entrepreneurs are believed to be forces of innovation, employment and economic dynamism. We use data from the National Longitudinal Surveys (NLS) to investigate the relative importance of financial and human capital exploiting the variation provided by intergenerational links. Specifically, we estimate the impacts of parental wealth and human capital on the probability that an individual will make the transition from a wage and salary job to self-employment. We find that young men's own financial assets exert a statistically significant, but quantitatively modest effect on the transition to self-employment. In contrast, the capital of parents exerts a large influence. Parents' strongest effect runs not through financial means, but rather through human capital, i.e., the intergenerational correlation in self-employment. This link is even stronger along gender lines.

961 citations

Journal ArticleDOI
TL;DR: This paper examined the relationship between disaster risk and long-run economic growth in a macroeconomic framework and found that a higher probability of capital destruction due to natural disasters reduces physical capital investment and therefore curtails long-term economic growth.
Abstract: I. INTRODUCTION Risks to life and property exist, in varying degrees, in every country of the world. Numerous studies on the relationship between risk and expected losses and economic decisions are available and generally widely known, (1) but to our knowledge there are no empirical studies that evaluate the effects of natural hazards on long-run economic growth in a macroeconomic framework. (2) Despite the vast empirical literature that examines the linkages between long-run average growth rates, economic policies, and political and institutional factors, the relationship between disaster risk and long-run growth has not been empirically examined. There is, however, a body of research that has examined the effects of natural disasters on economic variables in the short run. Tol and Leek (1999) provide a summary of the recent studies that assess the immediate repercussions of natural disasters on economic activity. The empirical findings in this literature (Albala-Bertrand, 1993; Dacy and Kunreuther, 1969; Otero and Marti, 1995) report that gross domestic product (GDP) is generally found to increase in the periods immediately following a natural disaster. This result is due to the fact that most of the damage caused by disasters is reflected in the loss of capital and durable goods. Because stocks of capital are not measured in GDP and replacing them is, GDP increases in periods immediately following a natural disaster. Our article extends the short-run analysis by examining the possible linkages among disasters, investment decisions, total factor productivity, and long-run economic growth. Because disaster risks differ substantially from country to country, it is reasonable to question whether there exists some relationship between disasters and long-run macroeconomic activity. On cursory examination, one might conclude that a higher probability of capital destruction due to natural disasters reduces physical capital investment and therefore curtails long-mn growth. However, such analysis is only partial and may be misleading. Disaster risk may reduce physical capital investment, but disasters also provide an opportunity to update the capital stock, thus encouraging the adoption of new technologies. Furthermore, an endogenous growth framework also suggests that disaster risk could potentially lead to higher rates of growth. In this type of model individuals invest in physical and human capital, but there is a positive externality associated with human capital accumulation. If disasters reduce the expected return to physical capital, then there is a correspondingly higher relative return to human capital. The higher relative return to human capital may lead to an increased emphasis on human capital investment, which may have a positive effect on growth. We present some initial evidence regarding the relationship between disasters and economic growth in Figures 1 through 4. These figures show the simple relationship between the number of natural disasters and long-run economic growth using a sample of 89 countries. The vertical axis represents the average annual growth rate of per capita GDP over the 1960-90 period. Data on per capita GDP are taken from Summers and Heston (1994). Along the horizontal axes are four different measures of the propensity for natural disasters. The disaster data in Figures 1 and 3 are historical information from Davis (1992) covering 190 years of the world's worst recorded natural disasters. Figures 2 and 4 represent more current and detailed information on natural disasters events for the period 1960 through 1990 from the Center for Research on the Epidemiology of Disasters (CRED) (EMDAT, 2000). Figures 1 and 2 show the natural log of one plus the total number of disaster events from Davis and CRED, respectively. (3) However, bec ause larger countries may be subject to more disasters, we present the natural log of one plus the number of disasters normalized by land area from Davis and CRED in Figures 3 and 4. …

900 citations

Posted Content
TL;DR: In this paper, the authors show that the open-economy model conforms with the evidence if an economy can use foreign debt to finance only a portion of its capital, even if 50% or more of the total.
Abstract: The empirical evidence reveals conditional convergence in the sense that economies grow faster per capita if they start further below their steady-state positions. For a homogeneous group of economies - like the U.S. states, regions of western European countries, and the GECD countries - the convergence is unconditional in that the poor economies grow faster than the rich ones. The neoclassical growth model for a closed economy fits these facts if capital is viewed broadly to encompass human investments, so that diminishing returns to capital set in slowly, and if differences in government policies or preferences about saving lead to heterogeneity in steady-state positions. Yet if the model is opened to allow for full capital mobility, then the predicted rates of convergence for capital and output are much higher than those observed empirically. We show that the open-economy model conforms with the evidence if an economy can use foreign debt to finance only a portion of its capital, even if 50% or more of the total. The problems in using human capital as collateral can explain the required imperfection in the credit market.

854 citations

Journal ArticleDOI
TL;DR: In this article, the steady state capital stock is inversely related to the rate of inflation, as a result that is directly opposite the usual conclusion that an economy is constructed in which the steady-state capital stock of a firm is positively related to its inflation rate.

841 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
202326
202242
202126
202031
201932
201848