Showing papers on "Physical capital published in 2000"

Intellectual capital and business performance in Malaysian industries

Abstract: The purpose of this empirical study is to investigate the three elements of intellectual capital, i.e. human capital, structural capital, and customer capital, and their inter‐relationships within two industry sectors in Malaysia. The study was conducted using a psychometrically validated questionnaire which was originally administered in Canada. The main conclusions from this particular study are that: human capital is important regardless of industry type; human capital has a greater influence on how a business should be structured in non‐service industries compared to service industries; customer capital has a significant influence over structural capital irrespective of industry; and finally, the development of structural capital has a positive relationship with business performance regardless of industry. The final specified models in this study show a robust explanation of business performance variance within the Malaysian context which bodes well for future research in alternative contexts.

Policies to Foster Human Capital

Abstract: This paper was given presented at the Aaron Wildavsky Forum, Richard and Rhoda Goldman School of Public Policy, University of California at Berkeley. The research reported here was supported by the National Science Foundation, the Russell Sage Foundation and the American Bar Foundation. Outline: Rising Wage Inequality - A Global Problem Linked To Trade and Technology Show Magnitudes of Problem 1.66 Trillion Cost To Restore U.S. to Previous Levels Tuition Subsidy Policy How to Combat This? Transfer Unpopular Skill enhancement is popular Another avenue is to subsidize work by the unskilled Think more broadly about tax/transfer policy Take the Long View Main Points of My Lecture Tonight About Skill Formation and Sources of Skill Formation in A Modern Economy Costly To Produce Skill Need to Recognize That Skill is Not Undimensional Recognize Diversity of Skill Motivation, IQ, Skill all matter but these are not the same thing. Need to Recognize the Life Cycle of Skill Production: Learning Begets Learning and Early Learning More Productive Than Later Learning: Not just because payoff is less for the late investor but also Because of synergies and Complementarity. Beyond A Certain Age and Stage in Life Cycle H.C. Investment Not Productive. Recognize Important Role of Families and Informal Sources of Skill "Social Planners" and professional educators equate skill with educational; what is produced in their institutions and what is measured by their tests; but in a broader definition of skill families play a much greater role (values; motivation) OJT is productive. Firms are highly productive sources of skill of Human Capital 25-50% of Human Capital Produce on the Job The Role of the Formal Overstated and Informal Context and Sources of Skills Understated. A Substantial Antimarket - Anti Choice Bias of Many Educational Planners Against Market and Competition - Yet The Evidence Strong Favors Competition in Provision of Education German Apprenticeship System // Data from U.S. Parental Preferences Peculiar World of High School and the Advantage of School to Work Programs Many Traditional Arguments Supporting Educational Interventions Greatly Overstated Evidence Against Short Term Liquidity Constraints Evidence that H.C. Should be Taxed More (At Least Within U.S. System) - Elimination of Progressive Taxes and Shift To A Consumption Tax and Making Tuition Deductible. Raises Physical Capital Accumulation and Raises Productivity and Wages Formal Schooling and Job Training both Private and Public Quality Effects Credit Constraints Wage Subsidies: Do They Work? Tax Policy Early Interventions and Donohue Siegelman Estimates Long View

Information Technology and Productivity: Evidence from Country-Level Data

Abstract: This paper studies a key driver of the demand for the products and services of the global IT industry--returns from IT investments. We estimate an intercountry production function relating IT and non-IT inputs to GDP output, on panel data from 36 countries over the 1985--1993 period. We find significant differences between developed and developing countries with respect to their structure of returns from capital investments. For the developed countries in the sample, returns from IT capital investments are estimated to be positive and significant, while returns from non-IT capital investments are not commensurate with relative factor shares. The situation is reversed for the developing countries subsample, where returns from non-IT capital are quite substantial, but those from IT capital investments are not statistically significant. We estimate output growth contributions of IT and non-IT capital and discuss the contrasting policy implications for capital investment by developed and developing economies.

Is Child Labor Inefficient

Abstract: We build a model of child labor and study its implications for welfare. We assume that there is a trade‐off between child labor and the accumulation of human capital. Even if parents are altruistic and child labor is socially inefficient, it may arise in equilibrium because parents fail to fully internalize its negative effects. This occurs when bequests are zero or when capital markets are imperfect. We also study the effects of a simple ban on child labor and derive conditions under which it may be Pareto improving in general equilibrium. We show that the implications of child labor for fertility are ambiguous.

A Cross-Country Empirical Investigation of the Aggregate Production Function Specification

Abstract: Many growth models assume that aggregate output is generated by a Cobb-Douglas production function. In this article we question the empirical relevance of this specification. We use a panel of 82 countries over a 28-year period to estimate a general constant-elasticity-of-substitution (CES) production function specification. We find that for the entire sample of countries we can reject the Cobb-Douglas specification. When we divide our sample of countries up into several subsamples, we find that physical capital and human capital adjusted labor are more substitutable in the richest group of countries and are less substitutable in the poorest group of countries than would be implied by a Cobb-Douglas specification.

Social Capital and Civil Society

Abstract: Social capital is an instantiated informal norm that promotes cooperation between individuals. In the economic sphere it reduces transaction costs, and in the political sphere it promotes the kind of associational life that is necessary for the success of limited government and modern democracy. Although social capital often arises from iterated Prisoner’s Dilemma games, it also is a byproduct of religion, tradition, shared historical experience, and other types of cultural norms. Thus whereas awareness of social capital is often critical for understanding development, it is difficult to generate through public policy.

Social Capital and Economic Development

Abstract: This paper attempts to delineate the mechanisms that link social capital and economic development. I show that social capital can produce two kinds of trust, both of which can reduce transaction costs. It is important to keep these two sources of trust apart, since development policies utilizing social capital have different impacts, depending on the basis of trust.

Toward an Implied Cost of Capital

Abstract: In this study, we propose an alternative technique for estimating the cost of equity capital. Specifically, we use a discounted residual income model to generate a market implied cost-of-capital. We then examine firm characteristics that are systematically related to this estimate of cost-of-capital. We show that a firm's implied cost-of-capital is a function of its industry membership, B/M ratio, forecasted long-term growth rate, and the dispersion in analyst earnings forecasts. Together, these variables explain around 60% of the cross-sectional variation in future (two-year-ahead) implied costs-of-capital. The stability of these long-term relations suggests they can be exploited to estimate future costs-of-capital. We discuss the implications of these findings for capital budgeting, investment decisions, and valuation research.

Economic Growth in the OECD Area: Recent Trends at the Aggregate and Sectoral Level

Abstract: This paper discusses growth performance in the OECD countries over the past two decades. Special attention is given to developments in labour productivity, allowing for human capital accumulation, and multifactor productivity (MFP), allowing for changes in the composition and quality of physical capital. The paper suggests wide (and growing) disparities in GDP per capita growth, while differences in labour productivity have remained broadly stable. These patterns are explained by different employment growth rates across countries. In the most recent years, a rise in MFP growth in ICT-related industries has boosted aggregate growth in some countries (e.g. the United States) ...

The Quality of Growth

Abstract: The last decade of the 20th century witnessed striking progress in the developing world but it also saw stagnation and setbacks. These differences and reversals in outcomes have taught us much about what contributes to development. The pace and quality of economic growth remains central. The discussion here brings out four dimensions of quality relevant for poverty outcomes: distribution, sustainability, variability, and governance surrounding the growth process. Viewing the quantative and qualitative sides of growth together puts the spotlight on a balanced growth of three sets of assets: human, physical, and natural capital, rather than an almost exclusive focus on promoting accumulation of physical capital.

Foreign Direct Investment: Good Cholesterol?

Abstract: This paper studies the proposition that capital inflows tend to take the form of FDI -i.e., the share of FDI in total liabilities tends to be higher- in countries that are safer, more promising and with better institutions and policies. It finds that this view is patently wrong since it stands the historical record on its head. It then uses alternative theories to make sense of the facts. It begins by studying the determinants of the size and composition of the flows of private capital across countries. It finds that while capital flows tend to go to countries that are safer and have better institutions and financial markets, the share of FDI in total flows is not an indication of good health. On the contrary, countries that are riskier, less financially developed and have weaker institutions tend to attract less capital but more of it in the form of FDI. Hence, interpreting the rising share of FDI as a sign of good health is unwarranted. This is even more so, given that FDI's recent rise has taken place while total private capital inflows have fallen.

Competing for Capital in a 'Lumpy' World

Abstract: This paper uses a new economic geography model to analyze tax competition between two countries trying to attract internationally mobile capital. Each government may levy a source tax on capital and a lump sum tax on fixed labor. If industry is concentrated in one of the countries, the analysis finds that the host country will gain from setting its source tax on capital above that of the other country. In particular, the host may increase its welfare per capita by setting a positive source tax on capital and capture the positive externality that arise in the agglomeration. If industry is not concentrated, however, both countries will subsidize capital.

Do states optimize? Public capital and economic growth

Abstract: This paper develops a non-linear theoretical relationship between public capital and economic growth in order to obtain estimates of the growth-maximizing ratio of public capital to private capital The model is empirically implemented using data on the 48 contiguous US states over the period 1970 to 1990 The empirical results provide evidence that (i) the relationship between public capital and economic growth is non-linear, (ii) the growth-maximizing public capital stock is approximately 60% to 80% as large as the private (tangible) capital stock, and (iii) permanent changes in public capital are associated with permanent changes in economic growth

Private capital flows, financial development, and economic growth in developing countries

Abstract: An important issue in the debate over the desirability of freer capital mobility for developing countries is whether capital flows have significant effects on economic growth. Proponents of capital account liberalization cite the growth-promoting attributes of capital inflows as a key benefit of financial integration for developing countries.

E-Capital: The Link between the Stock Market and the Labor Market in the 1990s

Abstract: OVER THE PAST decade, new technologies based on computer software began to transform the production and distribution of goods and to form the basis of new goods in the U.S. economy. The value of the stock market rose tremendously, with many of the largest increases among firms implementing the new technologies. Figure 1 depicts this increase in relation to the replacement cost of the inventories and plant and equipment of corporations. One of the reasons for the upsurge, according to the view developed in this paper, was an increase in the value of installed physical capital thanks to an unexpected rise in the demand for capital. A more important reason was the accumulation of intangibles, demand for which increased even more rapidly. Internet companies are valued almost exclusively for their intangibles: as of November 7, 2000, Yahoo! had a value of $37 billion but only $158 million of physical capital. The workers who develop and use the new technologies are mostly college graduates. Both the number of college-educated workers and their relative earnings rose remarkably in the 1990s. The ratio of dollars paid

An Analysis and Critique of the Bis Proposal on Capital Adequacy and Ratings

Abstract: This paper has examined two specific aspects of stage 1 of the (BISâ¬"s) Bank for International Settlementâ¬"s proposed reforms to the 8% risk-based capital ratio. We arguethat relying on â¬Straditionalâ¬? agency ratings could produce cyclically lagging rather leading capital requirements, resulting in an enhanced rather than reduced degree of instability in the banking and financial system. Despite this possible shortcoming, we believe that sensible risk based weighting of capital requirements is a step in the right direction. The current risk based bucketing proposal, which is tied to external agency ratings, or possibly to internal bank ratings, however, lacks a sufficient degree of granularity. In particular, lumping A and BBB (investment grade corporate borrowers) together with BB and B (below investment grade borrowers) severely misprices risk within that bucket and calls, at a minimum, for that bucket to be split into two. We examine the default loss experience oncorporate bonds for the period 1981-1999 and propose a revised weighting system whichmore closely resembles the actual loss experience on credit assets.

The social rate of return on infrastructure investments

Abstract: The authors estimate social rates of return to electricity-generating capacity and paved roads, relative to the return on general capital, by examining the effect on aggregate output and comparing that effect with the costs of construction. They find that both types of infrastructure capital are highly complementary with other physical capital and human capital, but have rapidly diminishing returns if increased in isolation. The complementarities on the one hand, and diminishing returns on the other, point to the existence of an optimal mix of capital inputs, making it very easy for a country to have too much - or too little - infrastructure. For policy purposes, the authors compare the rate of return for investing in infrastructure with the estimated rate of return to capital. The strong complementarity between physical and human capital, and the lower prices of investment goods in industrial economies, means that the rate of return to capital as a whole is just as high in rich countries as in the poorest countries but is highest in the middle-income (per capita) countries. In most countries the rates of return to both electricity-generating capacity and paved roads are on a par with, or lower than, rates of return on other forms of capital. But in a few countries there is evidence of acute shortages of electricity-generating capacity and paved roads and, therefore, excess returns to infrastructure investment. Excess returns are evidence of suboptimal investment that, in the case of paved roads, appears to follow a period of sustained economic growth during which road-building stocks have lagged behind investments in other types of capital. This effect is accentuated by the fact that the relative costs of road construction are lower in middle-income countries than in poorer and richer countries. As a rule, a tendency to infrastructure shortages - signaled by higher social rates of return to paved roads or electricity-generating capacity than to other forms of capital - is symptomatic of certain income classes of developing countries: electricity capacity in the poorest, paved roads in the middle-income group. To the extent that such high rates of return are not detected by microeconomic cost-benefit analysis, they suggest macroeconomic externalities associated with infrastructure.

Sources of Economic Growth: An Extensive Growth Accounting Exercise

Abstract: A growth accounting exercise is conducted for 88 countries for 1960-94 to examine the source of cross-country differences in total factor productivity (TFP) levels. Two differences distinguish this analysis from that of the related literature. First, the critical technology parameter – the share of physical capital in output – is econometrically estimated and the usual assumption of identical technology across regions is relaxed. Second, while the few studies on the determinants of cross-country differences in TFP have focused on growth rates of real output this analysis is on levels. Recent theoretical as well as empirical arguments point to the level of TFP as the more relevant variable to explain.

Learning About Internal Capital Markets From Corporate Spinoffs

Abstract: This paper examines the investment behavior of firms before and after they are spun off from their parent companies. We show that investment after the spinoff is significantly more sensitive to measures of investment opportunities (e.g. industry Tobin's Q or industry investment) than it is before the spinoff. Spinoffs tend to cut their investment in low Q industries and increase their investment in high Q industries. These changes are observed only in spinoffs of firms in industries unrelated to the parents' industries and in spinoffs where the stock market reacts favorably to the spinoff announcement. Our findings point to the possibility that one effect of spinoffs is to improve the allocation of capital.

Social capital and the net

Abstract: Social Capital and the Net A century and a half ago, the French journalist Alexis de Tocqueville travelled throughout the U.S. marvelling at the generosity of the American people. “When an American asks for the cooperation of his fellow citizens,” Tocqueville wrote, “it is seldom refused; and I have often seen it afforded spontaneously, and with great goodwill” [8]. He attributed this generosity to Americans’ tendency to look beyond their own immediate concerns. “The principle of self-interest rightly understood produces no great acts of self-sacrifice, but it suggests daily small acts of self-denial ... If the principle of interest rightly understood were to sway the whole moral world, extraordinary virtues would doubtless be more rare” [8]. This idea of self-interest (rightly understood) we now call “trust” in other people. According to Tocqueville and many others, people develop trust in each other when they join for common purposes in civic associations. Indeed, Robert Putnam, a professor at Harvard University, refers to a “virtuous circle” of trust, including group membership and informal social ties, that has become known as “social capital” [5]. Social capital helps make society and its governments run more smoothly. Beginning in the late 1960s and early 1970s, Americans began to withdraw from participation in all sorts of civic groups—from such traditional service organizations as the Rotary Clubs, Kiwanis, and League of Women Voters, to bowling leagues and card-playing clubs. Americans socialized less with friends and neighbors and voted less often in elections. The inevitable result was that Americans became less trusting of one another [6]. In 1960, 58% of Americans believed “most people can be trusted” (as opposed to saying “you can’t be too careful in dealing with people”). By the 1990s, barely more than 33% of Americans trusted one another, according to national surveys, including the General Social Survey and the American National Election Study. Americans had lost their sense of community. They didn’t mix with one another as much as they once did and didn’t trust one another as much as they once did. They became more balkanized, and their public life became more contentious, while their national institutions (especially the U.S. Congress) found it increasingly difficult to compromise on even the most basic public policy questions. The villain in the decline of social capital, Putnam argues, is technology—initially television, now the

Social capital: reconceptualizing the bottom line

Abstract: Examines social capital as a theoretic construct with the potential to enhance our understanding of public relations contribution to the organizational bottom line. There are three classes of outcomes: increased and/or more complex forms of social capital, reduced transaction costs, and organizational advantage. Like economic capital, social capital is not always used wisely and can produce negative consequences for actors.

Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition

Abstract: This paper presents a general-equilibrium model where human capital investment increases specialization and exposes skilled workers to region-specific earnings risk Interjurisdictional mobility of skilled labor mitigates these risks; state-contingent migration of skilled labor also improves efficiency. With perfect capital markets, labor-market integration raises welfare and reduces ex post earnings inequality. If instead human capital investment can only be financed through local taxes, labor-market integration leads to interjurisdictional fiscal competition, shifting the burden of taxation to low-skilled immobile workers. Decentralized public provision of human capital investment creates earnings inequalities and is inefficient.

The Firm as a Dedicated Hierarchy: A Theory of the Origin and Growth of Firms

Abstract: A fundamental problem entrepreneurs face in the formative stages of their businesses is how to provide incentives for employees to protect, rather than steal, the source of organizational rents. We study how the entrepreneur's response to this problem will determine the organization's internal structure, growth, and its eventual size. In particular, our model suggests large, steep hierarchies will predominate in physical capital intensive industries, and these will typically have seniority-based promotion policies. By contrast, flat hierarchies will be seen in human capital intensive industries. These will have up-or-out promotion systems, where experienced managers either become owners or are fired. Furthermore, flat hierarchies will have more distinctive technologies or cultures than steep hierarchies. The model points to some essential differences between organized hierarchies and markets.

Patents, Innovation and Growth

Abstract: New growth theories emphasize the role played by innovation in promoting economic growth. Since it is difficult to quantify the amount of innovation undertaken in an economy, there is little available empirical evidence assessing the contribution made by innovation to growth, in contrast to abundant evidence on the role of physical capital accumulation in the growth process. In this paper patent data are used to proxy the amount of innovation undertaken in an economy. The patent data are used to explore two questions. First, how important is innovation to economic growth in Australia, and second, are reductions in innovations sourced in Australia offset by increases in foreign sourced innovations in Australia?