Capital deepening

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

Serial Default and the

Abstract: Lucas (1990) argued that it was a paradox that more capital does not flow from rich countries to poor countries. He rejected the standard explanation of expropriation risk and argued that paucity of capital flows to poor countries must instead be rooted in externalities in human capital formation favoring further investment in already capital rich countries. In this paper, we review the various explanations offered for this paradox.' There is no doubt that there are many reasons why capital does not flow from rich to poor nations yet the evidence we present suggests some explanations are more relevant than others. In particular, as long as the odds of non repayment are as high as 65 percent for some low income countries, credit risk seems like a far more compelling reason for the paucity of rich-poor capital flows. The true paradox may not be that too little capital flows from the wealthy to the poor nations, but that too much capital (especially debt) is channeled to debt intolerant serial defaulters.

Deciphering the Fall and Rise in the Net Capital Share: Accumulation or Scarcity?

Abstract: In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well known, and a fall of comparable magnitude that continued until the 1970s, which is less well known. Overall, the net capital share has increased since 1948, but once disaggregated this increase turns out to come entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. Several influential accounts of the recent rise emphasize the role of increased capital accumulation, but this view is at odds with theory and evidence: it requires empirically improbable elasticities of substitution, and it presumes a correlation between the capital-income ratio and capital share that is not visible in the data. A more limited narrative that stresses scarcity and the increased cost of housing better fits the data. These results are clarified using a new, multisector model of factor shares.

Demand saturation-creation and economic growth

Abstract: In the standard literature, the fundamental factor restraining economic growth is diminishing returns to capital in production or R&D technology. This paper presents a model in which the factor restraining growth is saturation of demand for individual consumption good. The economy sustains growth through the introduction of new products/industries. The new products/industries create high growth of demand. By so doing, they elicit capital accumulation, and ultimately sustain economic growth. The model demonstrates the importance of demand-creating innovations which are different from the standard measure of technical progress, namely total factor productivity.

Contribution of highway capital to industry and national productivity growth

Abstract: The United States and many other advanced industrial countries are concerned about the slow down in productivity growth since the early 1970s. Recent discussions in the literature have emphasized inadequate growth of infrastructure capital as a cause of the slow down in productivity at the aggregate and industry levels. The level of aggregation used in estimating production and cost functions varies considerably among the different studies. No consensus has yet emerged on the precise causes of the productivity growth slow down. To meet the challenge posed by the diversity of the sources of productivity growth and to better understand the role played in the process by infrastructure capital (which in this study refers to highway capital) the authors formulate a structural model that incorporates most of the important forces likely to explain productivity growth. The framework for this model includes the effects of a variety of demand and supply factors as well as highway infrastructure capital on the acceleration or deceleration in productivity growth. A significant feature of this study is its comprehensive coverage of the U.S. economy. The study explores the role that highway capital plays in enhancing private sector productivity, both at the aggregate economy and disaggregated industry levels.