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Showing papers on "Physical capital published in 2007"


Journal ArticleDOI
TL;DR: The authors presented a new data set for years of schooling across countries for the 1960-2000 period, constructed from the OECD database on edu- cational attainment and from surveys published by UNESCO.
Abstract: We present a new data set for years of schooling across countries for the 1960-2000 period. The series are constructed from the OECD database on edu- cational attainment and from surveys published by UNESCO. Two features that improve the quality of our data with respect to other series, particularly for series in first-differences, are the use of surveys based on uniform classification systems of education over time, and an intensified use of information by age groups. As a result of the improvement in quality, these new series can be used as a direct substitute for Barro and Lee's (2001; Oxford Economic Papers, 3, 541-563) data in empirical research. In standard cross-country growth regressions we find that our series yield significant coefficients for schooling. In panel data estimates our series are also sig- nificant even when the regressions account for the accumulation of physical capital. Moreover, the estimated macro return is consistent with those reported in labour studies. These results differ from the typical findings of the earlier literature and are a consequence of the reduction in measurement error in the series.

1,362 citations


Posted Content
TL;DR: This paper found that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important, and that contract enforcement explains more of the pattern of trade than physical capital and skilled labor.
Abstract: Is a country's ability to enforce contracts an important determinant of comparative advantage? To answer this question, I construct a variable that measures, for each good, the proportion of its intermediate inputs that require relationship-specific investments. Combining this measure with data on trade flows and judicial quality, I find that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important. According to my estimates contract enforcement explains more of the pattern of trade than physical capital and skilled labor combined.

1,179 citations


Posted Content
TL;DR: In this article, the authors used a randomized experiment to measure the return to capital for the average microenterprise in their sample, regardless of whether they apply for credit and found that the average real return to be 5.7 percent a month, substantially higher than the market interest rate.
Abstract: Small and informal firms account for a large share of employment in developing countries. The rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity. However, measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks, which are likely to be correlated with capital stock. The authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample, regardless of whether they apply for credit. They accomplish this by providing cash and equipment grants to small firms in Sri Lanka, and measuring the increase in profits arising from this exogenous (positive) shock to capital stock. After controlling for possible spillover effects, the authors find the average real return to capital to be 5.7 percent a month, substantially higher than the market interest rate. They then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns. Returns are found to vary with entrepreneurial ability and with measures of other sources of cash within the household, but not to vary with risk aversion or uncertainty.

942 citations


Posted Content
TL;DR: In this paper, the authors investigated how firms operating in capital market oriented economies and bank oriented economies determine their capital structure and found that the leverage ratio is positively affected by the tangibility of assets and the size of the firm, but declines with an increase in firm profitability, growth opportunities and share price performance.
Abstract: The paper investigates how firms operating in capital market oriented economies (the United Kingdom and the United States) and bank oriented economies (France, Germany and Japan) determine their capital structure. Using panel data and a two-step system-GMM procedure, the paper finds that the leverage ratio is positively affected by the tangibility of assets and the size of the firm, but declines with an increase in firm profitability, growth opportunities and share price performance in both types of economies. The leverage ratio is also affected by the market conditions in which the firm operates. The degree and effectiveness of these determinants are dependent on the country's legal and financial traditions. The results also confirm that firms have target leverage ratios, with French firms being the quickest in adjusting their capital structure towards their target level, and the Japanese are the slowest. Overall, the capital structure of a firm is heavily influenced by the economic environment and its institutions, corporate governance practices, tax systems, the borrower-lender relationship, exposure to capital markets, and the level of investor protection in the country in which the firm operates.

671 citations


Book
01 Jan 2007
TL;DR: In this paper, the authors explain why and how entrepreneurship has emerged as an engine of economic growth, employment creation and competitiveness in global markets, and the entrepreneurial society reflects the emergence as entrepreneurship as an important source of economic development.
Abstract: This paper explains why and how entrepreneurship has emerged as an engine of economic growth, employment creation and competitiveness in global markets. The entrepreneurial society reflects the emergence as entrepreneurship as an important source of economic growth.

594 citations


Posted ContentDOI
TL;DR: This paper studied the dispersion in rates of provincial economic and TFP growth in China and found that human capital positively affects output per worker and productivity growth, in particular, in terms of its direct contribution to production.
Abstract: We study the dispersion in rates of provincial economic- and TFP growth in China. Our results show that regional growth patterns can be understood as a function of several interrelated factors, which include investment in physical capital, human capital, and infrastructure capital; the infusion of new technology and its regional spread; and market reforms, with a major step forward occurring following Deng Xiaoping's "South Trip" in 1992. We find that FDI had much larger effect on TFP growth before 1994 than after, and we attribute this to emergence of other channels of technology transfer when marketization accelerated. We find that human capital positively affects output per worker and productivity growth. In particular, in terms of its direct contribution to production, educated labor has a much higher marginal product. Moreover, we estimate a positive, direct effect of human capital on TFP growth. This direct effect is hypothesized to come from domestic innovation activities. The estimated spillover effect of human capital on TFP growth is positive and statistically significant, which is very robust to model specifications and estimation methods. The spillover effect appears to be much stronger before 1994. We conduct cost-benefit analysis and a policy "experiment," in which we project the impact of increases in human capital and infrastructure capital on regional inequality. We conclude that investing in human capital will be an effective policy to reduce regional gaps in China as well as an efficient means to promote economic growth.

560 citations


ReportDOI
TL;DR: In this paper, the authors find no evidence that providing financing in excess of domestic saving is the channel through which financial integration delivers its benefits, at least conditional on their existing institutional and financial structures.
Abstract: Nonindustrial countries that have relied more on foreign finance have not grown faster in the long run as standard theoretical models predict. The reason may lie in these countries’ limited ability to absorb foreign capital, especially because their financial systems have difficulty allocating it to productive uses, and because their currencies are prone to appreciation (and often overvaluation) when such inflows occur. The current anomaly of poor countries financing rich countries may not really hurt the former’s growth, at least conditional on their existing institutional and financial structures. Our results do not imply that foreign finance has no role in development or that all types of capital naturally flow “uphill.” Indeed, the patterns associated with foreign direct investment flows have generally been more consistent with theoretical predictions. However, we find no evidence that providing financing in excess of domestic saving is the channel through which financial integration delivers its benefits.

556 citations


Journal ArticleDOI
TL;DR: The authors showed that the marginal product of capital (MPK) is remarkably similar across countries and there is no prima facie support for the view that international credit frictions play a major role in preventing capital flows from rich to poor countries.
Abstract: Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows. Using easily accessible macroeconomic data we find that MPKs are remarkably similar across countries. Hence, there is no prima facie support for the view that international credit frictions play a major role in preventing capital flows from rich to poor countries. Lower capital ratios in these countries are instead attributable to lower endowments of complementary factors and lower efficiency, as well as to lower prices of output goods relative to capital. We also show that properly accounting for the share of income accruing to reproducible capital is critical to reach these conclusions. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries’ capital stocks and incomes. I. INTRODUCTION Is the world’s capital stock efficiently allocated across countries? If so, then all countries have roughly the same aggregate marginal product of capital (MPK). If not, the MPK will vary substantially from country to country. In the latter case, the world foregoes an opportunity to increase global GDP by reallocating capital from low to high MPK countries. The policy implications are far reaching. Given the enormous cross-country differences in observed capital-labor ratios (they vary by a factor of 100 in the data used in this paper) it may seem obvious that the MPK must vary dramatically as well. In this case we would have to conclude that there are important frictions in international capital markets that prevent an efficient cross-country allocation of capital. 1 However, as Lucas [1990] pointed out in his celebrated article, poor countries also have lower endowments of factors complementary with physical capital, such as human capital, and lower total

521 citations


Journal ArticleDOI
TL;DR: In this paper, the authors explore the positive relationship between green intellectual capital and competitive advantages of firms, and propose a novel construct called green Intellectual Capital (GIC) for green innovation or environmental management.
Abstract: No research explored intellectual capital about green innovation or environmental management. This study wanted to fill this research gap, and proposed a novel construct – green intellectual capital – to explore the positive relationship between green intellectual capital and competitive advantages of firms. The empirical results of this study showed that the three types of green intellectual capital – green human capital, green structural capital, and green relational capital – had positive effects on competitive advantages of firms. Moreover, this study found that green relational capital was the most common among these three types of green intellectual capital, and the three types of green intellectual capital of Medium & Small Enterprises (SMEs) were all significantly less than those of large enterprises in the information and electronics industry in Taiwan. In sum, companies investing many resources and efforts in green intellectual capital could not only meet the trends of strict international environmental regulations and popular environmental consciousness of consumers, but also eventually obtain corporate competitive advantages.

490 citations


Journal ArticleDOI
Luke Keele1
TL;DR: In this paper, the authors assess the relative contributions of both government performance and social capital at the macro level to explain the macro variation in trust and find that social capital appears to be the force which accounts for the decline in trust over the last 40 years.
Abstract: It is well understood that trust in government responds to the performance of the president, Congress, and the economy. Despite improved government performance, however, trust has never returned to the levels witnessed in the 1950s and 1960s. Social capital may be the force that has kept trust low. If so, we need to assess the relative contributions of both government performance and social capital at the macro level. Using macrolevel data, the analysis, here, is designed to capture the variation over time in both social capital and government performance and let them compete to explain the macro variation in trust. The empirical results demonstrate that both government performance and social capital matter, but that social capital appears to be the force which accounts for the decline in trust over the last 40 years.

469 citations


Journal ArticleDOI
TL;DR: In this paper, the relationship between human and financial capital and firm performance for women and men owned small firms in the service and retail sectors was examined, and it was found that human cap...
Abstract: This paper examines the relationship between human and financial capital and firm performance for women‐ and men‐owned small firms in the service and retail sectors. Results indicate that human cap...

Journal ArticleDOI
TL;DR: In this paper, the authors address two important issues at the nexus of the literatures on international trade, foreign direct investment (FDI), foreign affiliate sales (FAS), and multinational enterprises (MNEs).

Journal ArticleDOI
TL;DR: In this paper, the authors present a simple framework which embeds the role of liquidity creating banks in an otherwise standard general equilibrium growth model and find that the welfare cost of current capital adequacy regulation is equivalent to a permanent loss in consumption.
Abstract: Capital requirements are the cornerstone of modern bank regulation, yet little is known about their welfare cost. This paper measures this cost and finds that it is surprisingly large. I present a simple framework which embeds the role of liquidity creating banks in an otherwise standard general equilibrium growth model. A capital requirement limits the moral hazard on the part of banks that arises due to deposit insurance. However, this capital requirement is also costly because it reduces the ability of banks to create liquidity. The key insight is that equilibrium asset returns reveal the strength of households' preferences for liquidity and this allows for the derivation of a simple formula for the welfare cost of capital requirements that is a function of observable variables only. Using U.S. data, the welfare cost of current capital adequacy regulation is found to be equivalent to a permanent loss in consumption of between 0.1 and 1 percent.

Journal ArticleDOI
TL;DR: In this article, the authors used the Value Added Intellectual Coefficient (VAIC) for measuring the value-based performance of the Indian banking sector for a period of five years from 2000 to 2004.
Abstract: Purpose – The paper seeks to estimate and analyze the Value Added Intellectual Coefficient (VAIC™) for measuring the value‐based performance of the Indian banking sector for a period of five years from 2000 to 2004.Design/methodology/approach – Annual reports, especially the profit/loss account and balance‐sheet of the banks concerned for the relevant years, were used to obtain the data. A review is conducted of the international literature on intellectual capital with specific reference to literature that reviews measurement techniques and tools, and the VAIC™ method is applied in order to analyze the data of Indian banks for the five‐year period. The intellectual or human capital (HC) and physical capital (CA) of the Indian banking sector is analysed and their impact on the banks' value‐based performance is discussed.Findings – The study confirms the existence of vast differences in the performance of Indian banks in different segments, and there is also an improvement in the overall performance over th...

OtherDOI
26 Sep 2007
TL;DR: In this article, the authors examined the effect of human and social capital upon firm dissolution with data from a population of Dutch accounting firms for the period 1880-1990, and found that human capital was captured by firm-level proxies for firm tenure, industry experience, and graduate education.
Abstract: This study examined the effect of human and social capital upon firm dissolution with data from a population of Dutch accounting firms for the period 1880-1990. Human capital was captured by firm-level proxies for firm tenure, industry experience, and graduate education. The social capital proxy was professionals' ties to potential clients. Human and social capital strongly predicted firm dissolution, and effects depended on their specificity (uniqueness) and nonappropriability (the ownership status of that capital). Findings suggest an integration of the resource-based view of the firm and organizational ecology and a concomitant stimulant for future research along these lines.

Journal ArticleDOI
TL;DR: In this paper, the authors present a theory of establishment dynamics that simultaneously rationalizes the basic facts on economy-wide establishment growth, net exit, and size distributions, and show substantial sectoral heterogeneity in U.S. establishment size dynamics and distributions, which is well explained by variation in physical capital intensity.
Abstract: Why do growth and net exit rates of establishments decline with size? What determines the size distribution of establishments? This paper presents a theory of establishment dynamics that simultaneously rationalizes the basic facts on economy-wide establishment growth, net exit, and size distributions. The theory emphasizes the accumulation of industry-speci…c human capital in response to industry-speci…c productivity shocks. It predicts that establishment growth and net exit rates should decline faster with size and that the establishment size distribution should have thinner tails in sectors that use human capital less intensively or physical capital more intensively. In line with the theory, the data show substantial sectoral heterogeneity in U.S. establishment size dynamics and distributions, which is well explained by variation in physical capital intensity.

Journal ArticleDOI
TL;DR: In this article, the authors investigated the relationship between capital account openness and the share of labour in national income and showed a robust negative correlation between the degree of openness and labour share.
Abstract: This paper investigates the relationship between capital account openness and the share of labour in national income. Employing a new index of financial openness and a cross-country panel of labour shares available from the United Nations System of National Accounts, the author shows a robust negative correlation between the degree of openness and the labour share. Although this effect is not present for low income countries, the direct negative relationship holds for all other subsamples and in the presence of a variety of controls. A plausible explanation is that openness alters the conditions of bargaining between labour and capital. By increasing the bargaining strength of capital vis-a-vis labour, increased capital mobility raises rents accruing to capital. Thus, capital account openness may reduce labour's share of income in the firm, and thereby, at an economy-wide level, its share of national output.

Journal ArticleDOI
TL;DR: In this paper, the authors used data from the American Housing Survey to examine the rate at which physical capital depreciates in the United States and found that the typical home appreciated at an annual real rate of roughly 0.75 percent, after allowing for depreciation and maintenance.

ReportDOI
TL;DR: Based on a survey that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, the authors examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to capital across firm ownership, regions, and sectors.
Abstract: Based on a survey that we designed and that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, this paper examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to capital across firm ownership, regions, and sectors It provides a systematic comparison of investment efficiency among wholly and partially state-owned, wholly and partially foreign owned, and domestic privately owned firms, conditioning on their sector, location, and size characteristics It finds that even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms Similarly, certain regions and sectors have consistently lower returns to capital than other regions and sectors By our calculation, if China succeeds in allocating its capital more efficiently, it could reduce its investment intensity by 5 percent of GDP without sacrificing its economic growth (and hence deliver a greater improvement to its citizens' living standard)

Journal ArticleDOI
TL;DR: In this article, the authors define capital heterogeneity in terms of subjectively perceived attributes, the functions, characteristics, and uses of capital assets, which are not given, but have to be created or discovered by means of entrepreneurial action.
Abstract: Transaction cost, property rights, and resource-based approaches to the firm assume that assets, both tangible and intangible, are heterogeneous. Arranging these assets to minimize contractual hazards, to provide efficient investment incentives, or to exploit competitive advantage is conceived as the prime task of economic organization. None of these approaches, however, is based on a systematic theory of capital heterogeneity. In this paper we outline the approach to capital developed by the Austrian school of economics and show how Austrian capital theory provides a natural bridge between theory of entrepreneurship and the theory of the firm. We refine Austrian capital theory by defining capital heterogeneity in terms of subjectively perceived attributes, the functions, characteristics, and uses of capital assets. Such attributes are not given, but have to be created or discovered by means of entrepreneurial action. Conceiving entrepreneurship as the organization of heterogeneous capital provides new insights into the emergence, boundaries, and internal organization of the firm, and suggests testable implications about how entrepreneurship is manifested.

Posted Content
TL;DR: In this paper, the authors empirically examine India's economic growth experience during 1960-2004, focusing on the post 1973 acceleration, and highlight implications for aggregate productivity growth of the reallocation of resources out of agriculture to more productive activities in industry and services.
Abstract: This paper empirically examines India's economic growth experience during 1960-2004, focusing on the post 1973 acceleration. Careful attention is paid to data quality. The analysis focuses on two unusual dimensions of India's experience -- the concentration of growth in services production, and the modest levels of human and physical capital accumulation. A growth accounting analysis disaggregates by major sector, and highlights implications for aggregate productivity growth of the reallocation of resources out of agriculture to more productive activities in industry and services. But concerns are raised that growth in services may be overstated. India will need to broaden its current expansion to provide manufactured goods for the world market and jobs for its large pool of low-skilled workers. Increased public saving, as well as a rise in foreign saving -- particularly FDI -- could augment the rising household saving and support the increased investment necessary to sustain rapid growth.

Posted Content
TL;DR: In this article, the role of endogenous producer entry and product creation for monetary policy analysis and business cycle dynamics in a general equilibrium model with imperfect price adjustment is studied, where the free-entry condition links the price of equity (the value of products) with marginal cost and markups and hence with inflation dynamics.
Abstract: This paper studies the role of endogenous producer entry and product creation for monetary policy analysis and business cycle dynamics in a general equilibrium model with imperfect price adjustment. Optimal monetary policy stabilizes product prices, but lets the consumer price index vary to accommodate changes in the number of available products. The free-entry condition links the price of equity (the value of products) with marginal cost and markups and hence with inflation dynamics. No-arbitrage between bonds and equity links the expected return on shares, and thus the financing of product creation, with the return on bonds, affected by monetary policy via interest rate setting. This new channel of monetary policy transmission through asset prices restores the Taylor Principle in the presence of capital accumulation (in the form of new production lines) and forward-looking interest rate setting, unlike in models with traditional physical capital. We also study the implications of endogenous variety for the New Keynesian Phillips curve and business cycle dynamics more generally, and we document the effects of technology, deregulation, and monetary policy shocks, as well as the second moment properties of our model, by means of numerical examples.

Journal ArticleDOI
TL;DR: In this article, the hypothesis whether entrepreneurship is an important vehicle for knowledge flows and economic growth was tested and it was shown that an increase in innovative start-up activity is more effective than a general increase in general entrepreneurship for economic growth.
Abstract: Knowledge is recognized as an important ingredient for economic growth in addition to physical capital and labor. While transforming knowledge into products and processes it is exploited commercially. Nevertheless, the existing knowledge stock and the absorptive capacity of actors like employees at firms and researchers at universities and research institutions are conditional for the ability to produce, identify, and exploit knowledge. Since incumbent firms do not exploit new knowledge to the full extent, realized entrepreneurial opportunities may arise. This paper tests the hypothesis whether or not entrepreneurship is an important vehicle for knowledge flows and economic growth. The empirical results indicate that an increase in innovative start-up activity is more effective than an increase in general entrepreneurship for economic growth.

Journal ArticleDOI
TL;DR: In this article, the effects of local human capital on household-level rents and individual-level wages for a sample of Italian local labour markets were studied, supporting the idea that human capital generates positive externalities at the local level.
Abstract: The estimation of the effect of local human capital on wages only might not identify properly human capital spillovers. Appropriate identification requires considering the joint effect of local human capital on both wages and rents. Empirically, we study the effects of local human capital on household-level rents and individual-level wages for a sample of Italian local labour markets. Our results show a positive and robust effect of local human capital on rents, supporting the idea that human capital generates positive externalities at the local level. Our results also suggest that consumption and production externalities have a similar impact on wages.

Journal ArticleDOI
TL;DR: In this article, the authors use aggregate U.S. corporate sector data to estimate firms' optimal hiring and investment decisions and the consequences for firms' value, and decompose the estimated market value, thereby quantifying the link between firms" value and gross hiring flows, employment, gross investment flows, and physical capital.
Abstract: What role does labor play in a firm’s market value? We explore this question using a production-based asset pricing model with frictions in the adjustment of both capital and labor. We posit that hiring of labor is akin to investment in capital and that the two interact, with the interaction being a crucial determinant of the time series behavior of market value. We use aggregate U.S. corporate sector data to estimate firms' optimal hiring and investment decisions and the consequences for firms' value. The model generates a good fit of the data. We decompose the estimated market value, thereby quantifying the link between firms' value and gross hiring flows, employment, gross investment flows, and physical capital. We find that a conventional specification -- quadratic adjustment costs for capital and no hiring costs -- performs poorly. Hiring and investment flows, unlike employment and capital stocks, are volatile and both are essential to account for market value volatility. A key result is that firms' value embodies the value of hiring and investment over and above the capital stock.

Journal ArticleDOI
TL;DR: In this article, the role of working capital management policies on profitability of a company is studied and it has been seen that if a company desires to take a greate, it should take a Greate...
Abstract: It is felt that there is the need to study the role of working capital management policies on profitability of a company. Conventionally, it has been seen that if a company desires to take a greate...

Posted Content
TL;DR: In this article, the authors examined the determinants of corporate leverage in Egypt according to the assumptions of three theories of capital structure: tradeoff, pecking order, and free cash flow.
Abstract: Purpose – This research paper aims at examining the determinants of corporate leverage in Egypt according to the assumptions of three theories of capital structure: tradeoff, pecking order, and free cash flow.Design/methodology/approach – The methodology utilizes the benefits of the partial adjustment autoregressive model to measure the speed of adjusting long-term and short-term debts to a target level.Findings – The results indicate that companies use both long-term and short-term debt to adjust the leverage with a relative dependence on long-term debt; the tradeoff-related determinants of capital structure are taxes, debt/equity ratio and bankruptcy risk; the pecking order-related determinants of capital structure are growth and profitability; borrowing decisions are not affected by the assumptions of free cash flow. Overall, the explanatory powers of the three regression equations are high and significant which indicate that the model construction is quite indicative.Originality/value – The paper contributes to the literature in that it shows that the determinants of capital structure conform to those reported by other related studies in emerging markets as well as developed markets which supports the general conclusion that the determinants of capital structure in emerging and developed markets are converging.

Journal ArticleDOI
TL;DR: In this paper, a sample of analyst reports on large, listed Spanish companies provides some evidence on the question of whether financial analysts convey intellectual capital information in their recommendations, and the results also show a significant effect of growth opportunities on intellectual capital disclosure by financial analysts.

Journal ArticleDOI
TL;DR: In this paper, a framework for analyzing the risk allocation, capital budgeting, and capital structure decisions facing insurers and reinsurers is developed, which incorporates three key features: (i) value-maximizing insurers face product-market as well as capital-market imperfections that give rise to well-founded concerns with risk management and capital allocation; (ii) some, but not all, of the risks they face can be frictionlessly hedged in the capital market; and (iii) the distribution of their cash flows may be asymmetric, which alters the demand for
Abstract: This article builds on Froot and Stein in developing a framework for analyzing the risk allocation, capital budgeting, and capital structure decisions facing insurers and reinsurers. The model incorporates three key features: (i) value-maximizing insurers and reinsurers face product-market as well as capital-market imperfections that give rise to well-founded concerns with risk management and capital allocation; (ii) some, but not all, of the risks they face can be frictionlessly hedged in the capital market; and (iii) the distribution of their cash flows may be asymmetric, which alters the demand for underwriting and hedging. We show these features result in a three-factor model that determines the optimal pricing and allocation of risk and capital structure of the firm. This approach allows us to integrate these features into: (i) the pricing of risky investment, underwriting, reinsurance, and hedging; and (ii) the allocation of risk across all of these opportunities, and the optimal amount of surplus capital held by the firm.

ReportDOI
TL;DR: In this article, the authors empirically examine India's economic growth experience during 1960-2004, focusing on the post 1973 acceleration, and highlight implications for aggregate productivity growth of the reallocation of resources out of agriculture to more productive activities in industry and services.
Abstract: This paper empirically examines India's economic growth experience during 1960-2004, focusing on the post 1973 acceleration. Careful attention is paid to data quality. The analysis focuses on two unusual dimensions of India's experience -- the concentration of growth in services production, and the modest levels of human and physical capital accumulation. A growth accounting analysis disaggregates by major sector, and highlights implications for aggregate productivity growth of the reallocation of resources out of agriculture to more productive activities in industry and services. But concerns are raised that growth in services may be overstated. India will need to broaden its current expansion to provide manufactured goods for the world market and jobs for its large pool of low-skilled workers. Increased public saving, as well as a rise in foreign saving -- particularly FDI -- could augment the rising household saving and support the increased investment necessary to sustain rapid growth.