Showing papers on "Physical capital published in 2016"
01 Jan 2016
TL;DR: In this article, the authors examined the long-run competitive equilibrium in a growth model and explored the effects on this equilibrium of government debt in a single-commodity world without durable goods.
Abstract: This paper contains a model designed to serve two purposes, to examine long-run competitive equilibrium in a growth model and then to explore the effects on this equilibrium of government debt. Samuelson [8] has examined the determination of interest rates in a singlecommodity world without durable goods. In such an economy, interest rates are determined by consumption loans between individuals of different ages. By introducing production employing a durable capital good into this model, one can examine the case where individuals provide for their retirement years by lending to entrepreneurs. After describing alternative long-run equilibria available to a centrally planned economy, the competitive solution is described. In this economy, which has an infinitely long life, it is seen that, despite the absence of all the usual sources of inefficiency, the competitive solution can be inefficient. Modigliani [4] has explored the effects of the existence of government debt in an aggregate growth model. By introducing a government which issues debt and levies taxes to finance interest payments into the model described in the first part, it is possible to re-examine his conclusions in a model where consumption decisions are made individually, where taxes to finance the debt are included in the analysis, and where the changes in output arising from changes in the capital stock are explicitly acknowledged. It is seen that in the "normal" case external debt reduces the utility of an individual living in long-run equilibrium. Surprisingly, internal debt is seen to cause an even larger decline in this utility level. External debt has two effects in the long run, both arising from the taxes needed to finance the interest payments. The taxes directly reduce available lifetime consumption of the individual taxpayer. Further, by reducing his disposable income, taxes reduce his savings and thus the capital stock. Internal debt has both of these effects as well as a further reduction in the capital stock arising from the substitution of government debt for physical capital in individual portfolios.
1,043 citations
TL;DR: In this article, the Tobin's q is used to explain both physical and intangible investment, and the authors show that it is a better proxy for both physical investment and intangible capital.
Abstract: The neoclassical theory of investment has mainly been tested with physical investment, but we show it also helps explain intangible investment At the firm level, Tobin's q explains physical and intangible investment roughly equally well, and it explains total investment even better Compared to physical capital, intangible capital adjusts more slowly to changes in investment opportunities The classic q theory performs better in firms and years with more intangible capital: Total and even physical investment are better explained by Tobin's q and are less sensitive to cash flow At the macro level, Tobin's q explains intangible investment many times better than physical investment We propose a simple, new Tobin's q proxy that accounts for intangible capital, and we show that it is a superior proxy for both physical and intangible investment opportunities
465 citations
TL;DR: In this paper, the authors assess the direct and indirect effects of human capital on economic growth, including in the latter the interaction between human capital with the industrial specialization of countries, and find that human capital and the countries' productive specialization dynamics are crucial factors for economic growth.
265 citations
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TL;DR: In this paper, a general equilibrium model of North-South trade is proposed, in which the North continually introduces new goods and the rate at which technology diffuses to the South is a function of differences in the cost of production in the two regions.
Abstract: This paper constructs a general equilibrium model of North-South tradein which the North continually introduces new goods. The rate at whichtechnology diffuses to the South is a function of differences in the cost of production in the two regions. The key result of the model is that labor force growth in the South initially increases real wages inthe North (a standard result in classical trade models), but in the long run reduces Northern wages by accelerating the transfer of technology and drawing capital out of the North as well. Copyright 1986 by American Economic Association.(This abstract was borrowed from another version of this item.)
184 citations
TL;DR: In this article, the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China, was studied. But the authors did not consider the impact of SEZ on neighboring regions or cities further away.
Abstract: We study the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China. We use data from a panel of Chinese (prefecture-level) cities from 1988 to 2010. Our difference-in-difference estimation exploits the variation in the establishment of SEZ across time and space. We find that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20 %. This finding is confirmed with alternative specifications and in a sub-sample of inland provinces, where the selection of cities to host the zones was based on administrative criteria. The main channel is a positive effect on physical capital accumulation, although SEZ also have a positive effect on total factor productivity and human capital investments. We also investigate whether there are spillover effects of SEZ on neighboring regions or cities further away. We find positive and often significant spillover effects.
168 citations
TL;DR: In this article, the authors examined the cointegration and causal relationship between energy consumption and economic development in 16 Asia Pacific countries over the period 1970-2011 using the augmented production function which considers not only physical capital and labor but also human capital.
147 citations
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TL;DR: In this article, the authors argue that capital-skill complementarity was manifested in the aggregate economy as particular technologies spread, specifically batch and continuous-process methods of production, and that capital and skilled labor are always complements in the machine-maintenance segment of manufacturing, regardless of the technology.
Abstract: Recent technological advances and a widening of the wage structure have led many to conclude that technology and human capital are relative complements. The possibility that such a relationship exists today has prompted a widely held conjecture that technology and skill have always been relative complements. According to this view, technological advance always serves to widen the wage structure, and only large injections of education slow its relentless course. A related literature demonstrates that capital and skill are relative complements today and in the recent past (Zvi Griliches, 1969). Thus capital deepening appears also to have increased the relative demand for the educated, serving further to stretch the wage structure. Physical capital and technology are now regarded as the relative complements of human capital, but have they been so for the past two centuries? Some answers have already been provided. A literature has emerged on the bias to technological change across history that challenges the view that physical capital and human capital have always been relative complements. Many of the major technological advances of the 19th century substituted physical capital, raw materials, and unskilled labor for highly skilled artisans (John A. James and Jonathan S. Skinner, 1985). But if physical capital and human skill were not always relative complements, when did they become so, and when did new technology become skilled labor's complement? We argue that capital-skill complementarity was manifested in the aggregate economy as particular technologies spread, specifically batch and continuous-process methods of production. Across the past two centuries, manufacturing shifted first from artisanal to mechanized and nonmechanized factory production, then from simple factories to assembly lines, and finally from assembly lines to continuous and batch processes. Although few products were manufactured by more than two of the technologies mentioned, manufacturing, as a whole, progressed in the fashion described. In considering our argument it is useful to envision manufacturing as having two distinct stages: (i) a machine-installation and machine-maintenance segment and (ii) a production or assembly portion. Capital and educated (skilled) labor, we will argue, are always complements in the machine-maintenance segment of manufacturing, regardless of the technology. Machinists, for example, are needed to install machinery and make it run. The workable capital created by skilled labor plus raw capital is then used by unskilled labor to create the final product in the production or assembly segment of manufacturing. How the adoption of a technology alters the relative demand for skilled workers will depend on whether the machinemaintenance demand for skilled labor is offset by the production-process demand for unskilled labor.
133 citations
TL;DR: The authors examined the role of foreign direct investment (FDI) and human capital in economic growth in Chinese cities over the period 1991-2010, and found that FDI has a positive effect on the per capita GDP growth rate and this effect is intensified by the human capital endowment of the city.
132 citations
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TL;DR: In this paper, the role of allocative disturbances in aggregate economic fluctuations when human and physical capital are specialized has been investigated, and the authors consider the impact of such disturbances on the economy by inducing costly, time-consuming reallocation of specialized resources.
Abstract: chanted, albeit in varying degree, with business cycle theories that either posit unexplained nominal wage and price rigidities or rely on misperceptions about nominal variables as a key driving force. One response to this disenchantment has been a concentration of research effort on real business cycle theories. Aside from dissatisfaction with competitor theories, the very visible oil price shock episodes of the 1970's lent plausibility to the view that exogenous "real" disturbances cause large fluctuations in aggregate economic activity. This essay on real business cycle theory considers the role of allocative disturbances in aggregate economic fluctuations when human and physical capital are specialized. By "allocative disturbances," I mean events that impinge on the economy by inducing a costly, time-consuming reallocation of specialized resources. At least since the publication of Ricardo's Principles in 1817, economists have recognized some of the potentially important aggregate consequences of allocative disturbances. Ricardo writes:
125 citations
TL;DR: The authors argue that family economics should be an integral part of macroeconomics, and that accounting for the family leads to new answers to classic macro questions such as savings, education, and labor supply.
Abstract: Much of macroeconomics is concerned with the allocation of physical capital, human capital, and labor over time and across people. The decisions on savings, education, and labor supply that generate these variables are made within families. Yet the family (and decision-making in families) is typically ignored in macroeconomic models. In this chapter, we argue that family economics should be an integral part of macroeconomics, and that accounting for the family leads to new answers to classic macro questions. Our discussion is organized around three themes. We start by focusing on short and medium run fluctuations, and argue that changes in family structure in recent decades have important repercussions for the determination of aggregate labor supply and savings. Next, we turn to economic growth, and describe how accounting for families is central for understanding differences between rich and poor countries and for the determinants of long-run development. We conclude with an analysis of the role of the family as a driver of political and institutional change.
TL;DR: In this article, after studying more than 100 papers, the role of human capital in the organization and the characteristics of the human capital have been studied, and the results indicate that the common index which is important at all levels of management in the organisation, is human skill.
TL;DR: In this paper, the authors investigated the relation between the intellectual capital and organizational performance in four companies operating in the distribution of drinking water, between 2010 and 2014, and the results obtained from this study showed that there is a significant relationship between the Intellectual Capital and the organizational performance.
TL;DR: This paper studied the behavior of the US labor share over the past 65 years and found that intellectual property products (IPP) capital entirely accounts for the observed decline of the labor share, which otherwise is secularly constant for structures and equipment capital.
Abstract: We study the behavior of the US labor share over the past 65 years. We find that intellectual property products (IPP) capital entirely accounts for the observed decline of the US labor share, which otherwise is secularly constant for structures and equipment capital. The decline of the labor share reflects that the US is undergoing a transition to a more IPP capital-intensive economy. This result has essential implications for the US macroeconomic model.
TL;DR: In this paper, the authors present a simple model that can account for the observed eects of financial globalization, emphasizing the role of imperfect enforcement of domestic debts and the interactions between domestic and foreign debts.
Abstract: During the last few decades, many emerging markets lifted restrictions on cross-border …nan- cial transactions. In this paper, we present a simple model that can account for the observed eects of …nancial globalization. The model emphasizes the role of imperfect enforcement of domestic debts and the interactions between domestic and foreign debts. Financial globaliza- tion can lead to a variety of outcomes: (i) domestic capital ‡ight and ambiguous eects on net capital ‡ows, investment, and growth; (ii) capital in‡ows and higher investment and growth; or (iii) volatile capital ‡ows and unstable domestic …nancial markets. The model shows how the eects of …nancial globalization depend on the level of development, productivity, domestic
TL;DR: In this article, the authors investigated the relationship between intellectual capital and radical innovation and provided new evidence that helps to clarify the curvilinear intellectual capital-radical innovation relationship and the different role that the three types of intellectual capital play in that relationship.
TL;DR: A guiding quantitative framework enabling natural capital valuation that is fully consistent with capital theory, accounts for biophysical and economic feedbacks, and can guide interdisciplinary efforts to measure sustainability is presented.
Abstract: Valuing natural capital is fundamental to measuring sustainability. The United Nations Environment Programme, World Bank, and other agencies have called for inclusion of the value of natural capital in sustainability metrics, such as inclusive wealth. Much has been written about the importance of natural capital, but consistent, rigorous valuation approaches compatible with the pricing of traditional forms of capital have remained elusive. We present a guiding quantitative framework enabling natural capital valuation that is fully consistent with capital theory, accounts for biophysical and economic feedbacks, and can guide interdisciplinary efforts to measure sustainability. We illustrate this framework with an application to groundwater in the Kansas High Plains Aquifer, a rapidly depleting asset supporting significant food production. We develop a 10-y time series (1996−2005) of natural capital asset prices that accounts for technological, institutional, and physical changes. Kansas lost approximately $110 million per year (2005 US dollars) of capital value through groundwater withdrawal and changes in aquifer management during the decade spanning 1996–2005. This annual loss in wealth is approximately equal to the state’s 2005 budget surplus, and is substantially more than investments in schools over this period. Furthermore, real investment in agricultural capital also declined over this period. Although Kansas’ depletion of water wealth is substantial, it may be tractably managed through careful groundwater management and compensating investments in other natural and traditional assets. Measurement of natural capital value is required to inform management and ongoing investments in natural assets.
TL;DR: In this paper, the authors find that capital in the range of 15-23 percent of risk-weighted assets would have been sufficient to absorb losses in the vast majority of historic banking crises in advanced economies.
Abstract: We find that capital in the range of 15–23 percent of risk-weighted assets would have been sufficient to absorb losses in the vast majority of historic banking crises in advanced economies. Further capital increases would have had only marginal effects on preventing additional crises. Appropriate capital requirements may be somewhat below this range, as banks tend to hold capital in excess of regulatory minima, and other bail-in-able instruments can contribute to loss absorption capacity. While long-term social costs associated with this level of capital appear acceptable, the short-term costs of transitioning to higher bank capital may be substantial, which calls for a careful timing of such transition.
TL;DR: In this paper, the authors examined the effects of managerial social capital on investment sensitivity to cash flow and Q. They found that social capital positively affects the sensitivity of external finance to Q, while inversely influencing the sensitivity to external finance in markets characterized by weak legal protection of investors.
TL;DR: In this paper, the authors investigated the linkage of corporate sector performance with the capital structure and macroeconomic environment using a balanced panel data of 1594 Indian corporate firms over 14 years (1998 to 2011).
TL;DR: In this paper, the authors assess the growth implications of alternative methods of financing public spending on education in a small open economy and find that the non-distortionary financing method provides the highest output increase through its strong effect on physical and human capital stocks.
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TL;DR: In this article, the authors conducted a qualitative narrative appraisal of the existing empirical literature on the key macroeconomic determinants of economic growth in developing and developed countries, and found that the determinants that are associated with economic growth include physical capital, fiscal policy, human capital, trade, demographics, monetary policy and financial and technological factors.
Abstract: The paper conducts a qualitative narrative appraisal of the existing empirical literature on the key macroeconomic determinants of economic growth in developing and developed countries. Much as other empirical studies have investigated the determinants of economic growth using various econometric methods, the majority of these studies have not distinguished what drives or hinders economic growth in developing or developed countries. The study finds that the determinants of economic growth are different when this distinction is used. It reveals that in developing countries the key macroeconomic determinants of economic growth include foreign aid, foreign direct investment, fiscal policy, investment, trade, human capital development, demographics, monetary policy, natural resources, reforms and geographic, regional, political and financial factors. In developed countries, the study reveals that the key macroeconomic determinants that are associated with economic growth include physical capital, fiscal policy, human capital, trade, demographics, monetary policy and financial and technological factors.
TL;DR: This article studied the effect of changes in banks' capital requirements on lending by studying the joint dynamics of the historic aggregate capital ratio of the UK banking system and a set of macro-financial variables.
Abstract: This paper estimates the effect of changes in banks’ capital requirements on lending by studying the joint dynamics of the historic aggregate capital ratio of the UK banking system and a set of macro-financial variables. This is achieved by means of sign restrictions that attempt to identify shocks in past data that match a set of assumed directional responses of other variables to future changes in capital requirements aimed at increasing the resilience of the banking system to losses during an upswing. This may provide policy-makers with a plausible ‘upper bound’ on the short-term effects of future increases in macroprudential capital requirements in certain states of the UK economic cycle. An increase in the aggregate bank capital requirement during an economic upswing is associated with a reduction in lending, with a larger effect on lending to corporates than on that to households. The impact on GDP growth is statistically insignificant.
TL;DR: A more comprehensive model of demographic dividends is developed and used in a simulation with realistic demography to show how human capital investment has varied in relation to the changing demography from 1950 to the present, and how it might be expected to change over the rest of this century.
Abstract: The objective of this paper is to provide new evidence about the development effects of changes in population age structure and human and physical capital. This extends our previous work by developing and employing a more comprehensive model of demographic dividends. In addition, we extend earlier analysis about the quantity-quality tradeoff using newly available NTA data for 39 countries, in contrast to the nineteen with the necessary data in our 2010 study. This permits a more detailed analysis, treating public expenditures and private expenditures separately, and considering the role of per capita income as well as fertility and child dependency in relation to human capital spending. The analysis is used in a simulation with realistic demography to show how human capital investment has varied in relation to the changing demography from 1950 to the present, and how it might be expected to change over the rest of this century. These new estimates are then used in a more comprehensive model that incorporates both human and physical capital. The analysis provides estimates of the first and second demographic dividends and how they are affected by speed of fertility decline. The timing of the effects is documented and the relative importance of investment in physical and human capital is assessed. This improves our understanding of the economic implications of the demographic dividend and particularly the “second demographic dividend”.
TL;DR: In this article, the authors investigated the relation between the financing strategies of working capital requirement and firm performance for the period 1997 to 2012 and found that a suitable financing strategy can help firms improve their performance.
Abstract: This paper investigates the relation between the financing strategies of working capital requirement and firm performance for the period 1997 to 2012. Using the two-step generalized method of moments estimator, we find that a suitable financing strategy can help firms improve their performance. Moreover, the results indicate that the working capital requirement financing-performance relation changes during a financial crisis. Finally, we also find that this relation depends on a firm’s financial flexibility. The findings are of interest for managers and researchers and show that managers should not only be concerned about investing in working capital requirement but also consider how this investment is to be financed. To the best of our knowledge, this is the first paper to analyse how the financing strategy selected by firms to finance their working capital requirement affects their performance.
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TL;DR: In this article, the authors analyse the evolution of capital and labour (mis)allocation across firms in five euro-area countries (Belgium, France, Germany, Italy and Spain) and eight main sectors of the economy during the period 2002-2012.
Abstract: We analyse the evolution of capital and labour (mis)allocation across firms in five euro-area countries (Belgium, France, Germany, Italy and Spain) and eight main sectors of the economy during the period 2002-2012. Three key stylized facts emerge. First, in all countries with the exception of Germany, capital allocation has worsened over time whereas the efficiency of labour reallocation has not changed significantly. Second, the observed increase in capital misallocation has been particularly severe in services as opposed to industry. Third, misallocation of both labour and capital dropped in all countries in 2009 and again for some country-sectors in 2011-2012. We next take stock of the possible drivers of input misallocation dynamics in a standard panel regression framework. Controlling for demand conditions and for the initial level of misallocation, heightened uncertainty, restrictive bank credit standards and tight product and labour market regulation are found to have boosted input misallocation, whereas the Great Recession per se exerted a cleansing effect. JEL Classification: D24, D61, O47
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TL;DR: In this paper, the authors examined the impact of ownership type on the relationship of environmental capital expenditures and the behavior of different types of institutional investors by classifying institutional investors into two categories, short-term and long-term investors.
Abstract: This study empirically examines whether firms’ environmental capital expenditures impact institutional investors’ investment decisions in the Chinese market. We particularly examine the impact of ownership type on the relationship of environmental capital expenditures and the behavior of different types of institutional investors by classifying institutional investors into two categories, short-term and long-term investors. In addition, this study further investigates whether environmental capital expenditures related to ownership type increase firm value. We find that long-term institutional investors tend to invest in state-owned firms (SOEs) making environmental capital expenditures. Results also indicate that, with governmental backing and encouragement, the market value of SOEs making more environmental capital expenditures is likely to increase. However, no similar results are found for non-SOEs.
TL;DR: In this article, the causal impact of dismissal costs on capital deepening and productivity was investigated, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for larger firms.
Abstract: This article estimates the causal impact of dismissal costs on capital deepening and productivity, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for larger firms. We show that the rise in firing costs induced an increase in the capital-labour ratio and a decline in total factor productivity in small firms relative to larger firms. Our results indicate that capital deepening was more pronounced at the low-end of the capital distribution - where the reform hit arguably harder - and among firms endowed with a larger amount of liquid resources. We also find that stricter Employment Protection Legislation (EPL) raised the share of high-tenure workers, which suggests a complementarity between firm-specific human capital and physical capital in moderate EPL environments. [ABSTRACT FROM AUTHOR]