Showing papers on "Physical capital published in 1970"

The Distribution of Labor Incomes: A Survey with Special Reference to the Human Capital Approach

Abstract: Professor of Economies, Columbia University, and Senior Research Staff, National Bureau of Economic Research. This paper is based, in large part, upon ongoing research in human capital at the National Bureau. This research is financed by grants from the Carnegie Corporation and from the Economic Development Administration of the United States Department of Commerce. I am grateful to Gary Becker, Barry Chiswick, and Victor Fuchs for helpful comments, and to Masanori Hashimoto and Sara Paroush for most competent assistance.

Heterogeneous Capital, the Production Function and the Theory of Distribution

Abstract: Focuses on a study which dealt with production function, heterogeneous capital and the theory of distribution. Relations between the wage, the rate of interest and the product per worker in the two-commodity economy; Details on the surrogate production function; Premises of the traditional theory of distribution. (Из Ebsco)

Migrant labour and economic development.

Abstract: This discussion argues the following: that the movement of what has traditionally been termed "migrant labor" in and between developing countries can be important for development in a number of ways thus far given little or no atteniton in the literature; and the impact of labor movements varies greatly from country to country and area to area depending particularly on the length of absence of the laborer from his/her home area and on the similarities and differences between the economic and physical environments of the migrants home and the area or areas in which he/she works while away from home. The net effect on economic development of a particular movement of economically productive persons may be analyzed in terms of changes in production productivity and consumption in both the labor supplying (home) and the labor receiving (host) areas. Such changes may come about through variations in the relative supplies of productive factors in the volume of consumer demand in the home and host areas and through transfers of attitudes institutions and techniques of production. Movements of economically productive persons may help to induce changes in economic activities other than those in which they are directly employed. Both the direction and the magnitude of these effects are likely to vary from 1 pattern of migration to another. There appears to be an implicit assumption in the literature that whether or not the net economic effect is positive most of the impact on the supplying economy is negative. The economic impact of migrants is very much a function of the economic characteristics of the supplying economy and the host economies with which it is linked by migrants. Areas supplying migrants are likely to benefit from net additions to both human and physical capital from a widening of consumption expectations and horizons and from technological change especially after migrants return from the host economy. Whether or not these beneficial effects will be outweighed by decreases in output depends primarily on the extent to which migrants absences are coordinated with the structure and time pattern of employment opportunities in the home and host areas. Areas receiving migrants are most likely to benefit from low wages development of unused resources and the spread of new technology. Additionally they may gain entrepreneurs and additions to physical capital especially if some migrants settle permanently. Migrants may contribute to development problems by increasing inflationary pressures or by adding to social and political tensions but their presence may serve to stimulate production and investment in both the private and the public sectors.

A portfolio approach to optimizing the structure of capital claims and assets of a stock insurance company

Abstract: In the interest of their stockholders, policyholders and employees, management seeks to generate capital by selling a diversified portfolio of insurance claims on itself, while investing the funds in a balanced portfolio of finanical instruments. To generate and invest capital optimally, management must measure capital costs and investment returns accurately and be able to relate the risk-return characteristics of the array of capital claims to each other as well as to its portfolio of assets. This paper presents a technique to aid management in optimizing the portfolios of claims and investments and the degree of leverage in the capital structure. As a financial intermediary, an insurance company attracts capital by offering an instrument dissimilar to those in which it in turn invests. The assets (investments) of an insurance company are of the risk generating type-mortgages, bonds, stocks, even cash if one wishes to consider the risks of inflation. The insurance policies offered (liabilities to the company) are risk reducing to those who buy them because their returns are negatively correlated with the wealth of the insured.'

Financial structure and the theory of production

Abstract: ANY BUSINESS ENTERPRISE in the course of its operations must make at least three kinds of distinct decisions. First, it must decide upon a production plan-i.e., how much to produce and the choice of productive factors by which this may be optimally achieved. Second, it must decide how much money capital it should invest in fixed assets and working capital, both of which are necessary in order to sustain production. Third, it must decide how this investment should be financed. Despite the indisputable fact that these three kinds of decisions are interrelated, economic theorists, with few exceptions, have failed to incorporate them into a fully integrated decision model. The most recent and most important exception is the monograph by Vickers [13] in which the interdependencies between these various kinds of decisions are explicitly formulated.' Almost all earlier work on the theory of the firm included at best a partial integration of some of these decisions. Thus the theory of production has been integrated with the theory of investment in physical capital (see, e.g., Smith [11], Jorgenson [5], Lucas [7]), although this literature pays virtually no attention to financial problems. On the other hand, financial theorists, in studying how a given capital budget should be optimally financed, have ignored the firm's production decisions regarding the output and profit levels as exogenously determined (see, e.g., Robichek and Myers [10], Solomon [12]). The result is the development of two more or less unrelated bodies of literature: the classical theory of production and investment in physical capital on the one hand, and the capital budgeting and finance literature on the other. While Vickers' work is an important contribution, it still leaves many interesting questions unanswered, and some of these are taken up in the present paper. It deals principally with the situation where the firm must select the amount of debt finance to go along with a given amount of equity and pays less attention to the equally important case where both the debt and equity must be chosen in conjunction with the factors of production. In this paper we therefore give an explicit formulation of this latter case.2 This turns out to have very important behavioral implications and it will be shown that, although the firm's decision procedure should be formulated so as to incor-

The function and analysis of capital market rates

Abstract: Find the secret to improve the quality of life by reading this function and analysis of capital market rates. This is a kind of book that you need now. Besides, it can be your favorite book to read after having this book. Do you ask why? Well, this is a book that has different characteristic with others. You may not need to know who the author is, how well-known the work is. As wise word, never judge the words from who speaks, but make the words as your good value to your life.

Farm Size and Credit Policy

Abstract: Publisher Summary This chapter discusses the credit policy for farmers in India. Land and labor have ceased to be the predominant factors of growth in Indian agriculture. Capital, together with scientific knowledge, has already become a major source of growth, and its significance is rapidly increasing. The disparities in income and in wealth, within the agricultural sector, would therefore depend crucially on the way capital is and will be distributed among the different holding-size groups. Those committed to an egalitarian agrarian set-up have been focusing attention almost exclusively on the need to have a more equal distribution of land, neglecting the equally important issue of equitable distribution of capital. Credit from institutional sources is becoming increasingly important as a means of capital formation in agriculture. Whether institutional credit will be made an instrument for reducing the disparities in income and wealth in the agricultural sector will finally depend on the awareness and bargaining power of the small and middle farmers themselves.

The relationship between education and entrepreneurship in Nigeria

Abstract: The rate of economic growth is dependent upon the growth in factors of production and the rate of technical change. Recently some economists have shifted the emphasis away from the growth of physical capital to the growth of high-level manpower, such as entrepreneurship, as the major determinant of the rate of economic growth. In part, this shift has resulted from empirical studies based on American economic growth, which suggest that increases in the supply of physical capital explain no more than a fraction of growth in aggregate output.' To some extent, the reorientation has resulted from the increased use of the tools of other social sciences in the theory of economic development. Many scholars using these tools have contended that high-level human skills are key variables which link the sociocultural milieu with the rate of economic development. Despite the increased emphasis upon the need for entrepreneurs, empirical data on their determinants are lacking. A priori, a number of variables seem likely to influence the supply2 and success of entrepreneurs, including the socioeconomic class, socioethnic community, family structure, other politicosocio-cultural attachments, time perspective, education, training and work experience of the entrepreneurs; the nature of the labor and capital markets;

Causes and effects of private capital movements in germany, 1955-69*

Abstract: SUMMARY This paper analyses the German private capital movements in the period 1955-69. For this period it cannot be said that the capital movements played an equilibrating role in the balance-of-payments: In eight of the fifteen years a current surplus was coupled with a capital inflow; in one year (1969) the capital outflow was twice as high as the current surplus. To these disequilibrating capital movements the following causes have contributed: (i) frequent conflicts between internal and external equilibrium in the conduct of monetary policy; (ii) the political impossibility of an adequate policy mix; (iii) in conflict situations priority was given to internal considerations; (iv) speculative movements anticipating a revaluation. Germany frequently succeeded in influencing domestic credit conditions in the desired direction despite of countervailing capital flows. In 1960 and 1969, when a domestic boom was coupled with a substantial current surplus, partial controls of capital movements were not successful and Germany had to revalue. A regression analysis for the period 1959-68 supports the hypothesis that the private capital balance is a negative function of the current balance and positively correlated with the interest differential between Germany and the Euro-dollar market.

Off-Farm Income of People Involved in Farming

Abstract: Two years ago, in his presidential address, Dr. C. E. Bishop told members of the American Agricultural Economics Association that “… our preoccupation with the problems of the farm firm has resulted in little or no attention to problems that are much more important to the majority of the rural population”. Preoccupation with the farm firm is evident in our traditional approach to the study of incomes of farm people. There is still a tendency to look at the incomes of farm firms rather than at the incomes of people who farm. Present income statistics are oriented to the farm firm in a way that makes it fairly difficult to study the economic well-being of people involved in farming.

Estimating the cost of capital, a different approach

Abstract: If a firm is owned by one person, that person can directly indicate to management the cost of his capital. The determination of the stockholder's cost of capital of a publicly owned firm is more complex. Econometric studies using past earnings, dividends, and capital structure have been performed by Miller and Modigliani, Gordon and others to estimate the cost of equity capital. But the cost of capital is a function of investor expectations and only indirectly related to past operating results. The objective of the study was to estimate the cost of capital using information obtained directly from investors. Personal interviewing of the investors of specific firms would be more meaningful to the management of that firm, but this technique was not feasible; thus a mail questionnaire sent to a select group of investors was used. Conclusions are reached relative to the magnitude of the cost of equity capital of four selected firms as of May-June of 1968, and several surprising and contrasting insights concerning dividend policy, that could have financial policy implications, are obtained. The desirability of the financial manager obtaining more information from investors is stressed.

Cost of capital as a function of financial leverage

Abstract: This study has three objectives. First, it develops new evidence on the sensitivity of cost of capital in relation to financial leverage. Second, the findings are interpreted in the light of the existing financial theory. The concept of shifting of cost of capital curves is also introduced and explored both in theory and in relation to empirical testing. Third, the conclusions are placed within the framework of financial management at the business firm level. To accomplish these objectives a new, heretofore untried, approach to testing the cost of funds to a firm has been developed. In contrast to the almost universally accepted cross-section analysis, this study develops cost of capital functions for each company separately. Subsequently these functions are aggregated, compared, and also analyzed in a cross-section fashion. This approach, in the opinion of the present author, is supported by the fact that (1) both the Net Operating Income and Net Income theories of cost of capital are stated in terms of a firm, not industry or other grouping of firms, and (2) from the practical point of view the question of optimality of capital structure is relevant, and indeed operationally meaningful, only at the firm level.

Security and investment: more evidence

Abstract: IN CLASSICAL economic theory, the firm's stock of physical capital is adjusted toward the optimum as capital productivity is greater or less than cost. A thread of this thinking is woven into the investment equations of most of the major econometric models by inserting, in independent variable(s) form, the stock-adjustment idea. In modern (Keynesian) macroeconomic theory, optimum investment is where the marginal effciency of capital just equals "the" interest rate. The marginal efficiency of capital is the rate of discount that equates expected dollar flow to the present cost of the investment. Since the expected dollar flow is a function of effective demand and the stock of capital, investment again is seen to be an adjustment as the stock of capital is either more or less than optimal. Thus, both classical and modern investment theories contain the stock-adjustment idea. But in addition, modern investment theory places heavy emphasis on "the" interest rate, expected dollar returns, and dollar cost of investments, all financial variables. Therefore, in the typical econometric investment function, the classical "real" variables are synthesized with the modern financial variables. For example, in the basic investment equation (4a) of the Wharton model, investment in manufacturing plant and equipment is a function of the "real" variables: capacity utilization, gross output, the stock of manufacturing capital; two financial variables; and anticipations. Distributed lag weights are applied to those variables where required. Equation 4a is:

Capital allocation in less developed economies

Abstract: “European mining is done by companies, and company's money is almost like government money…. Machinery is bought, houses are built, in fact the capital of the company is spent…. After possibly a series of great hardships to the staff and disasters to the company, it is found that the tin raised is infinitesimal in value when compared with the rate of expenditure, and that the longer the work goes on the greater will be the losses. This is usually discovered when the paid-up capital is all but exhausted. The company is wound up and the State gets a bad name with investors, and the only people who really enjoy themselves are the neighbouring Chinese miners who buy the mine and the plant for an old song and make several large fortunes out of working on their own ridiculous and primitive methods.”