Showing papers on "Physical capital published in 2001"
TL;DR: In this paper, the authors investigate the role of information in affecting a firm's cost of capital using a multi-asset rational expectations model and show that differences in the composition of information between public and private information affect the cost of investment, with investors demanding a higher return to hold stocks with greater private information.
Abstract: We investigate the role of information in affecting a firm's cost of capital. Using a multi-asset rational expectations model, we show that differences in the composition of information between public and private information affect the cost of capital, with investors demanding a higher return to hold stocks with greater private information. This higher return arises because informed investors are better able to shift their portfolio weights to incorporate new information, and uninformed investors are thus disadvantaged. The model demonstrates how in equilibrium the quantity and quality of information affect asset prices, resulting in cross-sectional differences in firms' required returns. We show how a firm can influence its cost of capital by choosing features like accounting treatments, financial analyst coverage, and market microstructure.
2,415 citations
TL;DR: In this paper, the authors describe a growth model with the property that human capital accumulation can account for all observed growth, which is consistent with evidence on individual productivities as measured by census earnings data.
Abstract: This paper describes a growth model with the property that human capital accumulation can account for all observed growth. The model is shown to be consistent with evidence on individual productivities as measured by census earnings data. The central hypothesis is that we learn more when we interact with more productive people.
1,493 citations
01 Jan 2001
TL;DR: A discussion of definitions of social capital, then turning to issues in measurement, and finally, presents some evidence on the consequences of Social capital is presented in this article, where the authors focus on the external returns, the public returns to social capital.
Abstract: This paper starts with a discussion of definitions of social capital, then turns to issues in measurement, and finally, presents some evidence on the consequences of social capital. In the last five years, I have been working exclusively on some specific and perhaps unique problems about social capital in the United States, so all of my examples are going to be drawn from the United States experience. I don’t want to be interpreted as saying these trends are common to all OECD countries. It is just that the United States has been the main focus of my research for the past five years. There are, among those of us who work in the area, some marginal differences in terms of exactly how we would define social capital, but Michael Woolcock correctly says in his paper that among the people who are working in this field, there has been a visible convergence, definitionally, toward something like the definition he offers. The central idea of social capital, in my view, is that networks and the associated norms of reciprocity have value. They have value for the people who are in them, and they have, at least in some instances, demonstrable externalities, so that there are both public and private faces of social capital. I am focussing largely on the external returns, the public returns to social capital, but I think that is not at all inconsistent with the idea that there are also private returns. The same is no doubt true in the area of human capital, i.e. there are simultaneously public and private returns. In the great debate of the two Cambridges about "capital", the focus of much of the discussion was on whether physical capital was homogeneous enough to be susceptible to aggregate measurement. There is room for similar debates about human and social capital. Obviously there are many different forms of physical capital. For instance, both an egg-beater and an aircraft carrier enter into the American national accounts as little bits of physical capital, and yet they are not interchangeable. Try fixing your morning omelette with an aircraft carrier, or try attacking the Serbs with an eggbeater. The same thing is true about social capital. Social capital is certainly far from homogeneous.
1,275 citations
TL;DR: In this paper, the authors exploit the well-known differences in social capital across different parts of Italy to identify the effect of social capital on financial development, and show that the behavior of movers is still affected by the level of Social capital present in the province where they were born.
Abstract: To identify the effect of social capital on financial development, we exploit the well-known differences in social capital (Banfield (1958), Putnam (1993)) across different parts of Italy. In areas of the country with high levels of social capital, households invest less in cash and more in stock, are more likely to use checks, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less-educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital present in the province where they were born.
1,034 citations
TL;DR: In this paper, the authors present evidence that supports the individual-based model of social capital formation, including seven facts: (l) the relationship between social capital and age is first increasing and then decreasing, (i) social capital declines with expected mobility, social capital investment is higher in occupations with greater returns to social skills, (ii) social connections fall sharply with physical distance, (iii) people who invest in human capital also invest in social capital, and (iv), social capital appears to have interpersonal complementarities.
Abstract: To identify the determinants of social capital formation, it is necessary to understand the social capital investment decision of individuals. Individual social capital should then be aggregated to measure the social capital of a community. This paper assembles the evidence that supports the individual-based model of social capital formation, including seven facts: (l) the relationship between social capital and age is first increasing and then decreasing, (2) social capital declines with expected mobility, (3) social capital investment is higher in occupations with greater returns to social skills, (4) social capital is higher among homeowners, (5) social connections fall sharply with physical distance, (6) people who invest in human capital also invest in social capital, and (7) social capital appears to have interpersonal complementarities.
1,017 citations
TL;DR: In this paper, the empirical relationship between democracy and economic growth is examined and it is shown that democratic institutions are responsive to the demands of the poor by expanding access to education and lowering income inequality, but do so at the expense of physical capital accumulation.
746 citations
TL;DR: In this article, the authors proposed a monthly measure of the intensity of capital controls across 29 emerging markets, based on restrictions on foreign ownership of equities, which provides information on the extent and evolution of financial liberalization.
439 citations
Book•
21 Aug 2001
TL;DR: The role of assets in community-based development is discussed in this paper, where a history of community development in America and recurring issues in community development are discussed, as well as the challenges of regionalism asset building and public participation.
Abstract: Chapter 1: The Role of Assets in Community-Based Development Whither Community? Growth Versus Development People Versus Place Capacity Building Community Sustainability The Challenge of Regionalism Asset Building Public Participation The Role of Community-Based Organizations Models of Community Development Summary and Conclusions Chapter 2: A History of Community Development in America The Evolution of Community Development Recurring Issues in Community Development Summary and Conclusions Chapter 3: Community Sustainability What Is Community Sustainability? Why Sustainability? The History of Sustainability Approaches to Sustainability Summary and Conclusions Chapter 4: The Community Development Process Community Organizing Public Participation Planning Models, Techniques, and Process Steps Summary and Conclusions Chapter 5: The Role of Community-Based Organizations Community Development Corporations Local Development Corporations Neighborhood Associations Community Youth Organizations Faith-Based Organizations Community Foundations International Nongovernmental Organizations Summary and Conclusions Chapter 6: Human Capital Workforce Development Issues Key Concepts and Debates CBOs and Workforce Development Context for Workforce Development Key Actors and Institutions Local Labor Market Data Developing Goals and Strategies Summary and Conclusions Chapter 7: Social Capital Social Capital Definition and Issues Key Concepts and Debates CBOs and Social Capital Social Capital and Ethnic Enclaves Social Capital and Local Economic Development Assessing Social Capital Summary and Conclusions Chapter 8: Physical Capital Housing Issues Key Concepts and Debates A History of Federal Housing Policy The Role of CBOs in Housing Provision The Impact of CBOs Summary and Conclusions Chapter 9: Financial Capital Financial Capital Issues Key Concepts and Debates Community Credit Institutions Context for Community Credit Institutions Key Actors and Institutions Community Economic Development Finance Predatory Lending Individual Development Accounts Assessing Local Credit Markets Strategies for Building Local Credit Markets Summary and Conclusions Chapter 10: Environmental Capital Forms of Environmental Capital Land Use and Environmental Capital The Roles of Government and the Market Community-Based Organizations Summary and Conclusions Chapter 11: Political Capital Key Concepts and Debates Methods Community-Based Organization and Political Capital Community Collaboration and Political Capital Deliberative Democracy as Political Capital Summary and Conclusions Chapter 12: Cultural Capital Cultural Capital Definition and Issues Key Concepts and Debates Culture and Place Government and CBOs in Cultural Capital Summary and Conclusions Chapter 13: Food, Energy, and Community Local Food Systems and Community Types of Local Food Systems Energy and Local Sustainability Summary and Conclusions Chapter 14: Natural Disasters and Climate Change: The Role of Community Assets What Are Natural Disasters? What Creates Natural Disasters? Responses to Natural Disasters The Role of Community-Based Organizations Summary and Conclusions Chapter 15: The Future of Community Development Fulfilling the Promise of Community-Based Development Local Versus External Initiation of Community Development Community-Based Organizations and International Development An Agenda for Promoting Community Development in America Summary and Conclusions
436 citations
TL;DR: In this article, the process of moving installed physical capital to a new use was studied using equipment-level data from aerospace plants that closed during the 1990s, and the analysis yields three results that suggest significant sectoral specificity of physical capital and substantial costs of redeploying the capital.
Abstract: Using equipment‐level data from aerospace plants that closed during the 1990s, this paper studies the process of moving installed physical capital to a new use. The analysis yields three results that suggest significant sectoral specificity of physical capital and substantial costs of redeploying the capital. First, other aerospace companies are overrepresented among buyers of the used capital relative to their representation in the market for new investment goods. Second, even after age‐related depreciation is taken into account, capital sells for a substantial discount relative to replacement cost; the more specialized the type of capital, the greater the discount. Yet, capital sold to other aerospace firms fetches a higher price than capital sold to industry outsiders. Finally, the process of winding down operations and selling the equipment takes several years.
427 citations
TL;DR: The analysis indicates that three dimensions of social network capital should be distinguished: relationships with other traders, which among other things help firms economize on transactions costs; relationships with potential lenders; and family relationships, which reduce efficiency, possibly because of the blurring of firm boundaries.
Abstract: Using data on agricultural traders in Madagascar, this paper shows that social network capital has a large effect on firm productivity. Better connected traders have significantly larger sales and value added than less connected traders after controlling for physical and human inputs as well as for entrepreneur characteristics. The analysis indicates that three dimensions of social network capital should be distinguished: relationships with other traders, which among other things help firms economize on transactions costs; relationships with potential lenders; and family relationships, which reduce efficiency, possibly because of the blurring of firm boundaries. We find no evidence that social capital favors collusion.
405 citations
TL;DR: In this article, the authors used a cross-country data set to investigate the effects of capital mobility on economic growth and found that countries with a more open capital account have outperformed countries that have restricted capital mobility.
Abstract: In this paper I use a new cross-country data set to investigate the effects of capital mobility on economic growth. The new indicator of capital mobility used in this analysis is superior to previously used indexes in two respects: (1) It allows for intermediate situations, where a country’s capital account is semi-open; and (2) it is available for two different periods in time. The results obtained suggest that, after controlling for other variables (including aggregate investment), countries with a more open capital account have outperformed countries that have restricted capital mobility. There is also evidence, however, suggesting that an open capital account positively affects growth only after a country has achieved a certain degree of economic development. This provides support to the view that there is an optimal sequencing for capital account liberalization.
TL;DR: In this article, the authors present empirical estimates of human-capital augmented growth equations for a panel of 21 OECD countries over the period 1971-98, using an improved dataset on human capital and a novel econometric technique that reconciles growth model assumptions with the needs of panel data regressions.
Abstract: This paper presents empirical estimates of human-capital augmented growth equations for a panel of 21 OECD countries over the period 1971-98. It uses an improved dataset on human capital and a novel econometric technique that reconciles growth model assumptions with the needs of panel data regressions. Unlike several previous studies, our results point to a positive and significant impact of human capital accumulation to output per capita growth. The estimated long-run effect on output of one additional year of education (about 6 per cent) is also consistent with microeconomic evidence on the private returns to schooling. We also found a significant growth effect from the accumulation of physical capital and a speed of convergence to the steady state of around 15 per cent per year. Taken together these results are not consistent with the human capital augmented version of the Solow model, but rather they support an endogenous growth model a la Uzawa-Lucas, with constant returns to ...
Posted Content•
TL;DR: In this paper, a strictly positive probability of migration to a richer country, by raising both the level of human capital formed by optimizing individuals in the home country and the average level of non-migrants in the country, can enhance welfare and nudge the economy toward the social optimum.
Abstract: When productivity is fostered by an individual's own human capital as well as by the economy-wide average level of human capital, individuals under-invest in human capital. The provision of subsidies for the formation of human capital, conditional on the subsidy being self-financed by tax revenues, can bring the economy to its socially optimal level of human capital. Yet a strictly positive probability of migration to a richer country, by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of non-migrants in the country, can enhance welfare and nudge the economy toward the social optimum. Indeed, under a well-controlled, restrictive migration policy the welfare of all workers is higher than in the absence of this policy.
TL;DR: The authors investigated the influence of health on the growth paths often industrialized countries over the course of 100 to 125 years, finding that changes in health increased their pace of growth by 30 to 40 percent, altering permanently the slope of their growth paths.
Abstract: This article investigates the influence of health on the growth paths often industrialized countries over the course of 100 to 125 years. Changes in health increased their pace of growth by 30 to 40 percent, altering permanently the slope of their growth paths. This fmding is robust across five measures of long-term health and it remains largely unchanged when "controlled" for investment in physical capital. Healthrelated variables correlate positively with years of schooling. However, schooling variables by themselves do not replicate the results obtained from health-related measures. Health improvements thus do not merely follow economic progress. T heories of growth assign a pivotal role to human ability. But the pertinence of health to ability and to growth remains largely unexamined. While economists have observed health's influence on human productive capacity at the micro level, it is yet unknown whether that influence extends to the aggregate level, especially over a longer period.' Despite numerous empirical studies of growth, few have examined the long-term effects of the nineteenth century's unique developments, a gap this study tries to narrow. Doing so, however, constrains the choice of countries because data for only a handful of countries extend into the nineteenth century. The countries and time spans selected are Australia (188 1-1994), Denmark (1870-1992), Finland (1881-1992), France (1870-1994), Italy
TL;DR: In this article, the authors show how option pricing methods can be used to allocate required capital (surplus) across lines of insurance, and they show that marginal default values add up to the total default value for the company, so that the capital allocations are unique and not arbitrary.
Abstract: This study shows how option pricing methods can be used to allocate required capital (surplus) across lines of insurance. The capital allocations depend on the uncertainty about each line's losses and also on correlations with other lines' losses and with asset returns. The allocations depend on the marginal contribution of each line to default value-that is, to the present value of the insurance company's option to default. The authors show that marginal default values add up to the total default value for the company, so that the capital allocations are unique and not arbitrary. They therefore disagree with prior literature arguing that capital should not be allocated to lines of business or should be allocated uniformly. The study presents several examples based on standard option pricing methods. However, the "adding up" result justifying unique capital allocations holds for any joint probability distribution of losses and asset returns. The study concludes with implications for insurance pricing and regulation.
TL;DR: In this paper, the optimal dynamic consumption and portfolio decisions in the presence of capital gains taxes and short-sale restrictions are analyzed. But the authors focus on the long-term trade-off between the diversification benefits and tax costs of trading over an investor's lifetime.
Abstract: This article characterizes optimal dynamic consumption and portfolio decisions in the presence of capital gains taxes and short-sale restrictions. The optimal decisions are a function of the investor's age, initial portfolio holdings, and tax basis. Our results capture the trade-off between the diversification benefits and tax costs of trading over an investor's lifetime. The incentive to rediversify the portfolio is inversely related to the size of the embedded gain and investor's age. Contrary to standard financial advice, the optimal equity holding increases well into an investor's lifetime in our model due to the forgiveness of capital gains taxes at death.
TL;DR: In this paper, the authors derived a version of the income convergence equation augmented with public capital and found that the implied elasticity of output with respect to infrastructure is somewhere around 0.1 to 0.15.
Abstract: This paper estimates dynamic effects of public capital on output per capita. Based on an open economy growth model, I derive a version of the income convergence equation augmented with public capital. This equation is estimated using panel data of United States and Japanese regions. Sensible results are obtained when public capital is disaggregated into components. In both countries, the infrastructure component of public capital turns out to have significantly positive effects. The implied elasticity of output with respect to infrastructure is somewhere around 0.1 to 0.15. This suggests a modest contribution of infrastructure to postwar growth of the two countries.
TL;DR: In this paper, the effects of human and technological capital on productivity in a sample of large French and Swedish firms were investigated, and they found evidence of positive interactions between these two types of capital.
TL;DR: In this paper, the authors analyse the incentive impact of bank capital regulation in a model with endogenous capital, assuming regulators randomly audit banks and require under-capitalised banks either to bear the fixed cost of new issue or to liquidate.
Abstract: We analyse the incentive impact of bank capital regulation in a model with endogenous capital, assuming regulators randomly audit banks and require undercapitalised banks either to bear the fixed cost of new issue or to liquidate. Forward looking banks with sufficient franchise value maintain a buffer of capital in excess of the regulatory minimum. In our dynamic setting we show, amongst other results: that incentives for risk taking depend upon this buffer of free capital, not the total level; and that the regulatory capital requirement has no long run effect on bank risk-taking.
TL;DR: In this paper, the authors investigated the origin of social capital and other productive resources and found that start-up conditions and business experience have a paramount influence on social and physical capital.
Abstract: have. Using original survey data from three African countries, we establish that individual traders with more contacts have higher output. We also investigate the origin of social capital and other productive resources. The evidence suggests that start-up conditions and business experience have a paramount influence on social and physical capital. Family background is relatively unimportant after the creation of the firm, but it matters at start-up. In a world characterized by transactions costs, economic exchange is difficult and complex. Finding buyers and sellers takes time and effort, negotiating and enforcing contracts is costly, and contractual performance must be monitored. Social capital can help economize on transactions costs by speeding up search, increasing trust, and facilitating the circulation of information (e.g., Knack and Keefer; Fukuyama; Granovetter; Putnam, Leonardi, and Nanetti). The effect of transactions costs on eco-
TL;DR: In this paper, the benefits and costs of FPIs from the perspective of the recipients are discussed and empirical evidence regarding the relationship between FPIs and market development, degree of capital market integration, cost of capital, cross-market correlation and market volatility is presented.
Abstract: Reform of local capital markets and relaxation of capital controls to attract foreign portfolio investments (FPIs) has become an integral part of development strategy. The proximity of market openings and large, sudden shifts in international capital flows gave credence to the notion that the liberalization was the primary culprit in precipitating the recent Asian crisis. Hence, this paper reassesses the benefits and costs of FPIs from the perspective of the recipients. Specifically, it discusses the various FPI contributions and presents empirical evidence regarding the relationship between FPIs and market development, degree of capital market integration, cost of capital, cross-market correlation and market volatility. It is clear that the evidence on benefits of FPIs is strong, whereas the policy concerns regarding resource mobilization, market comovements, contagion, and volatility are largely unwarranted. The authors make some policy suggestions regarding preconditions for capital market openings, market regulation, and liberalization sequencing.
TL;DR: In this article, the authors investigated the contribution of learning to the rapid increases in labor productivity observed in the construction of Liberty ships during World War II and found that part of the measured productivity increases were secured at the expense of quality.
Abstract: This paper offers some new estimates of the contribution of learning to the rapid increases in labor productivity observed in the construction of Liberty ships during World War II. The study exploits new data on physical capital investment and vessel quality constructed from contemporary records held at the National Archives. Estimates of the rate of learning are shown to be sensitive to the inclusion of the new capital data, and data on vessel quality provide evidence that part of the measured productivity increases were secured at the expense of quality.
TL;DR: In this article, the authors define intellectual capital as individuals' complementary capacity to generate added value and thus create wealth, which is an extension of human capital theory to include the intangible capacities of people.
Abstract: In this article, intellectual capital is seen as complementary capacities of competence and commitment. Based on theoretically and empirically robust human capital theory, we define intellectual capital as individuals’ complementary capacity to generate added value and thus create wealth. Resources are then perceived to be both tangible and intangible. This view is an extension of human capital theory to include the intangible capacities of people. Implications for future research are discussed.
TL;DR: In this article, the authors analyzed the evolution of rural nonfarm employment and income in Chile during 1990-96, showing that during the period, RNFE and incomes increased 10% and 18%, respectively, reaching 39% of rural employment and 41% of non-farm incomes.
TL;DR: In this paper, the determinants of capital structure of Malaysian companies utilizing data from 1984 to 1999 were examined using pooled OLS regressions, showing that profitability, size, growth, risk and tangibility variables have significant influence on all types of debt.
Abstract: We examine the determinants of capital structure of Malaysian companies utilizing data from 1984 to 1999. We classify data into four sub-periods that correspond to different stages of Malaysian capital market. Debt is decomposed into three categories: short-term, long-term and total debt. Both book value and market value debt ratios are calculated. The results of pooled OLS regressions show that profitability, size, growth, risk and tangibility variables have significant influence on all types of debt. These results are normally consistent with the results of fixed effect estimation with the exception that risk variable loses its significance. Unlike the evidence from the developed markets, investment opportunity (market-to-book value ratio) has no significant impact on debt policy in the emerging market of Malaysia. Our results are generally robust to time periods, but the significance of some variables changes over time. Profitability has a persistent and consistent negative relationship with all types of debt ratios in all periods and under all estimation methods. This confirms the capital structure prediction of the pecking order theory in an emerging capital market.
TL;DR: In this article, the authors study the impact of tax policies on growth in a one-sector growth model with infrastructure investment and show that the balanced growth rate is an increasing function of the percent of government revenues that goes to infrastructure.
Book•
15 Feb 2001
TL;DR: In this paper, a short book, Zvi Griliches was a modern master of empirical economics and he recounts what he and others have learned about the sources of economic growth.
Abstract: Zvi Griliches was a modern master of empirical economics. In this short book, he recounts what he and others have learned about the sources of economic growth. This book conveys the way he tackled research problems. For Griliches, economic theorizing without measurement is merely the fashioning of parables, but measurement without theory is blind. Judgement enables one to strike the right balance. The book begins with economists' first attempts to measure productivity growth systematically in the 1930s. In the mid-1950s these efforts culminated in a startling puzzle. The growth of measured inputs like labour and capital explained only a fraction of the growth of national output. Economists called this phenomenon "efficiency" or "technical change" or "the residual". However, Griliches observes that the most accurate name was a "measure of our ignorance". What explained the rest of economic growth quickly became one of the most important questions in economics. Over the next 30 years, Griliches and his colleagues and students looked for various components of the residual in education (the formation of human capital), investment (the formation of physical capital), and research and development. In 1973, after the oil price shocks, productivity growth slowed and the residual almost disappeared. Since the shocks were a short-term phenomenon, they could not account for the slowdown. A main focus on this book is therefore the puzzle of the productivity slowdown and how to date it and how to explain it.
Posted Content•
TL;DR: Helliwell defined social capital as the networks and norms that facilitate cooperative activities within groups (bonding social capital) and between groups (bridging social capital). Helliwell documents a number of studies that show that social capital actually saves lives as discussed by the authors.
Abstract: In this chapter, John Helliwell sets the scene for many of the papers that follow by providing an up-to-date and lucid survey of the literature on the impact of social capital on both the economy or economic performance and well-being. This latter term is closely related to the concept of social progress used in this volume. He begins by defining social capital as the networks and norms that facilitate cooperative activities within groups (bonding social capital) and between groups (bridging social capital). Helliwell documents a number of studies that show that social capital actually saves lives. He surveys the literature on subjective well-being, pointing out that unemployment lowers subjective well-being by more than the usual measure of economic cost and certainly more than inflation.
TL;DR: In this article, the authors consider efficient venture capital investment duration for different types of entrepreneurial firms so that on exit, information asymmetries between the venture capitalist and the new owners of the investment are minimized and capital gains maximized.