Showing papers on "Physical capital published in 2017"

Long-term economic growth projections in the Shared Socioeconomic Pathways

Abstract: Long-term economic scenarios (up to 2100) are needed as a basis to explore possible different futures for major environmental challenges, including climate change. Given the high level of uncertainty involved, such scenarios would need to span a wide range of possible growth trajectories. The recently developed storylines of the Shared Socioeconomic Pathways (SSPs) provide a basis for making such projections. This paper describes a consistent methodology to derive (per capita) GDP trend pathways on a country basis. The methodology is based on a convergence process and places emphasis on the key drivers of economic growth in the long run: population, total factor productivity, physical capital, employment and human capital, and energy and fossil fuel resources (specifically oil and gas). The paper uses this methodology to derive country-level economic growth projections for 184 countries. The paper also investigates the influence of short-term growth rate estimates on the long-term income levels in various countries. It does so by comparing long-term projections based on short-term forecasts from 2011 with the projections based on forecasts from 2013. This highlights the effects of the recent economic crisis and uncertainty in short term developments on longer term growth trends. The projections are subject to large uncertainties, particularly for the later decades, and disregard a wide range of country-specific drivers of economic growth that are outside the narrow economic framework, such as external shocks, governance barriers and feedbacks from environmental damage. Hence, they should be interpreted with sufficient care and not be treated as predictions.

Capital Allocation and Productivity in South Europe

Abstract: Starting in the early 1990s, countries in southern Europe experienced low productivity growth alongside declining real interest rates. We use data for manufacturing firms in Spain between 1999 and 2012 to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor, and a significant increase in productivity losses from capital misallocation over time. We develop a model with size-dependent financial frictions that is consistent with important aspects of firms’ behavior in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a significant decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We show that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway.

The Human Capital Hoax: Work, Debt and Insecurity in the Era of Uberization:

Abstract: Human capital theory – developed by neoclassical economists like Gary Becker and Theodore Schultz – is widely considered a useful way to explain how employees might enhance their value in organizat...

Future growth patterns of world regions – A GDP scenario approach

Abstract: Global GDP projections for the 21st century are needed for the exploration of long-term global environmental problems, in particular climate change. Greenhouse gas emissions as well as climate change mitigation and adaption capacities strongly depend on growth of per capita income. However, long-term economic projections are highly uncertain. This paper provides five new long-term economic scenarios as part of the newly developed shared socio-economic pathways (SSPs) which represent a set of widely diverging narratives. A method of GDP scenario building is presented that is based on assumptions about technological progress, and human and physical capital formation as major drivers of long-term GDP per capita growth. The impact of these drivers differs significantly between different shared socio-economic pathways and is traced back to the underlying narratives and the associated population and education scenarios. In a highly fragmented world, technological and knowledge spillovers are low. Hence, the growth impact of technological progress and human capital is comparatively low, and per capita income diverges between world regions. These factors play a much larger role in globalization scenarios, leading to higher economic growth and stronger convergence between world regions. At the global average, per capita GDP is projected to grow annually in a range between 1.0% (SSP3) and 2.8% (SSP5) from 2010 to 2100. While this covers a large portion of variety in future global economic growth projections, plausible lower and higher growth projections may still be conceivable. The GDP projections are put into the context of historic patterns of economic growth (stylized facts), and their sensitivity to key assumptions is explored.

Investment in capital markets

Abstract: Investment in Capital Markets creates a strategic vision on the financial capital investment in the capital markets with the aim to get an increased return premium in the short and long time periods. The book is written with a main goal to explain the pros and cons of the financial capital investment in the capital markets, discussing the sophisticated investment concepts and techniques in the simple understandable readable general format language. We would like to highlight the three interesting facts about the book: 1. It is centered on the consideration of the modern investment products, the investment vehicles and the investment mediums for the financial capital investment in the capital markets; 2. It is focused on the financial risk calculation and mitigation techniques for the financial capital investment in the financial capital markets. 3. It is aimed to describe the quantum winning virtuous investment strategies creation and execution techniques during the financial capital investment in the capital markets. The investors, financiers, economists, financial analysts, financial traders, financial advisers, lawmakers, policy analysts, subject experts, professors, and students will certainly enjoy a breathtaking splendid learning journey with the explained new ideas, established concepts and outlined future prospects toward the financial capital investment in the capital markets with the aim to get an increased return premium in the short and long time periods.

Impact of intellectual capital on corporate performance: evidence from the Arab region

Abstract: Purpose The purpose of this paper is twofold: first, to fill a gap in the intellectual capital (IC) literature by providing insights into the relationship between IC and corporate performance among Arab companies and second, to challenge the validity of the Value Added Intellectual Coefficient (VAIC) as a measure of IC’s contribution to performance. Design/methodology/approach The research sample included 100 publicly traded Arab companies selected by Forbes Middle East and ranked as top performers in terms of sales, profits, assets, and market value. The methodology included assessing the impact of IC components on company earnings, profitability, efficiency, and market performance for the period between 2011 and 2015. Research hypotheses were tested through the presentation of descriptive statistics, normality tests, correlation matrix, and multiple regression models. Findings The research yielded ambiguous results. Earnings and profitability were significantly affected by structural and physical capital; efficiency was determined primarily by physical capital; and market performance was mainly influenced by human capital. Research limitations/implications The main limitation of the research comes from disadvantages of VAIC as the measure of IC’s contributions to performance. Originality/value The paper fills a void in the study of IC and corporate performance among Arab companies.

Do The Effects of Social Nudges Persist? Theory and Evidence from 38 Natural Field Experiments

Abstract: This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions.

Economic complexity, human capital and economic growth: empirical research based on cross-country panel data

Abstract: Economic complexity reflects a country’s production capabilities and plays an important role in economic growth. This article measures the economic complexity of 210 countries using the method of reflections, and investigates the impact of economic complexity and human capital on economic growth. The measurement results show that there are significant differences regarding the level of complexity among countries. High-income economies have higher complexity than low- and middle-income economies. The empirical findings demonstrate that economic complexity and different levels of human capital have positive effects on long- and short-term growth. A positive interaction effect on economic growth exists between economic complexity and human capital. In addition, secondary education as a proxy for human capital has a relatively greater positive direct effect and a much stronger interactive effect with complexity on economic growth. In addition, the magnitude of the interaction effect between economic c...

Human capital matters: Market valuation of firm investments in training and the role of complementary assets

Abstract: Research summary: This article empirically examines the economic value to firms of investing in the training of their employees and firm-level factors that influence how much the firms benefit. Event study methodology is used to obtain a measure of the economic impact of information regarding a firm's human capital management investments and policies. Subsequent regression analyses are then used to test hypotheses regarding possible complementary relationships between firm-level factors and human capital investments. Results provide robust support for the proposition that effective investments in human capital and training matter, and that these human capital investments are more impactful when combined with complementary assets of R&D, physical capital, and advertising investments. Managerial summary: Do firm investments in training and the development of employee human capital matter with regard to financial performance? We find that, yes, these investments do matter. Our results show that managers who view employee human capital as an asset to be invested in and developed can expect to outperform those who view it as a cost to be minimized. In addition, we find that these human capital investments will be of even greater economic value to firms when they have made complementary investments in R&D, physical capital, and advertising. Copyright © 2016 John Wiley & Sons, Ltd.

The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia

Abstract: The effect of human capital on growth involves multiple channels. On the one hand, an increase in human capital directly affects economic growth by enhancing labor productivity in production. On the other hand, human capital is an important input into R&D and therefore increases labor productivity indirectly by accelerating technological change. In addition, different types of human capital such as basic and higher education or training-on-the-job might play different roles in both production and innovation activities. We merge individual data on valuable patents granted in Prussia in the late nineteenth-century with county-level data on literacy, craftsmanship, secondary schooling, and income tax revenues to explore the complex relationship between various types of human capital, innovation, and income. We find that the Second Industrial Revolution can be seen as a transition period when it comes to the role of human capital. As in the preceding First Industrial Revolution, “useful knowledge” embodied in master craftsmen was related to innovation, especially of independent inventors. As in the subsequent twentieth century, the quality of basic education was associated with both workers’ productivity and firms’ R&D processes. In a final step, we show that literacy had also a negative effect on fertility which increased with innovation. In general, our findings support the notion that the accumulation of basic human capital was crucial for the transition to modern economic growth.

Caught in the middle? the economics of middle‐income traps

Abstract: This paper provides an overview of the recent analytical and empirical literature on middle-income traps. The first part examines the descriptive and statistical evidence on these traps. The second discusses the various arguments that have been put forward to explain the existence, and persistence, of middle-income traps. These arguments include diminishing returns to physical capital, exhaustion of cheap labor and imitation gains, insufficient quality of human capital, inadequate contract enforcement and intellectual property protection, distorted incentives and misallocation of talent, lack of access to advanced infrastructure, and lack of access to finance, especially in the form of venture capital. The third part considers public policies aimed at avoiding, and escaping from, middle-income traps. The concluding part identifies a number of directions in which the empirical and theoretical literature could fruitfully evolve.

Capital Unchained: Finance, Intangible Assets and the Double Life of Capital in the Offshore World

Abstract: The rise of intangible assets such as brand names, research and development, patents and other forms of abstract capital such as digital platforms and data flows has confounded extant measures and concepts of capital and accumulation. What used to be a residual asset category known as ‘goodwill’ has now overtaken so-called fixed or tangible assets in the profitability and valuation of many leading corporations. Yet these intangible assets lead a double life as both spatial and temporal in some dimensions, yet fluid and spatio-temporally elusive in others. Using a framework focused on measuring (by accountants), managing (by corporations) and monitoring (by International Political Economy scholars and regulators), this article explores the longer term implications of accumulation of internationalised capital in intangible and abstract forms, and the prominent role of finance and offshore in giving mobility and fluidity to these forms of capital. The article suggests that while global value chain an...

Real effects of bank capital regulations: Global evidence

Abstract: We examine the effect of the full set of bank capital regulations (capital stringency) on loan growth, using bank-level data for a maximum of 125 countries over the period 1998-2011. Contrary to standard theoretical considerations, we find that overall capital stringency only has a weak negative effect on loan growth. In fact, this effect is completely offset if banks hold moderately high levels of capital. Interestingly, the components of capital stringency that have the strongest negative effect on loan growth are those related to the prevention of banks to use as capital borrowed funds and assets other than cash or government securities. In contrast, compliance with Basel guidelines in using Basel- and credit-risk weights has a much less potent effect on loan growth.

The international effect of managerial social capital on the cost of equity

Abstract: We examine the effect of managerial social capital on the firm's cost of equity capital. We argue that social ties alleviate information asymmetry and agency problems, which in turn leads to a decrease in the cost of equity. Using a large panel of companies from 52 countries over the period 1999–2012, we document that social capital inversely affects the cost of equity. Our evidence suggests that the association between social capital and the cost of equity capital is stronger in underdeveloped financial markets and those characterized by weak legal protection. The marginal effect of social capital is also stronger for constrained firms with profitable investment opportunities. Our results are robust to alternative model specifications and tests for endogeneity.

Policy Uncertainty, Investment, and the Cost of Capital

Abstract: We examine the effect of economic policy uncertainty on the relation between investment and the cost of capital. Using the news-based index developed by Baker, Bloom, and Davis (2016) for twenty-one countries, we find that the strength of the negative relation between investment and the cost of capital decreases during times of high economic policy uncertainty. An increase in policy uncertainty reduces the sensitivity of investment to the cost of capital most for firms operating in industries that depend strongly on government subsidies and government consumption as well as in countries with high state ownership. Consistent with the price informativeness channel, we find that an increase in policy uncertainty reduces the investment-cost of capital sensitivity for firms from more opaque countries, firms with low analyst coverage, firms with no credit rating, and small firms. We conclude that economic policy uncertainty distorts the fundamental relation between investment and the cost of capital.

Firm‐specific human capital investments as a signal of general value: Revisiting assumptions about human capital and how it is managed

Abstract: Research summary: Prior scholarship has assumed that firm-specific and general human capital can be analyzed separately. This article argues that, in some settings, this is not the case because prior firm-specific human capital investments can be a market signal of an individual's willingness and ability to make such investments in the future. As such, the willingness and ability to make firm-specific investments is a type of general human capital that links firm-specific and general human capital in important ways. The article develops theory about these investments, market signals, and value appropriation. Then, the article examines implications for human resource management and several important questions in the field of strategic management, including theories of the firm and microfoundations of competitive advantage. Managerial summary: While managers don't often use the terms firm-specific and general skills, they certainly recognize that investments employees make in their skill sets are more or less relevant to a specific firm. For instance, investing in specific relationships within a firm or learning a firm's proprietary software would be considered firm-specific investments. While such skills may seem relevant only to the particular firm in which they were invested, these investments may also send valuable signals to competing firms that such employees are willing and able to make similar investments elsewhere. Hence, managers should be interested in determining if a potential hire has made prior firm-specific investments to help them know whether that person might be likely to make such investments in his or her future place of employment. Copyright © 2016 John Wiley & Sons, Ltd.

How Important is the Global Financial Cycle? Evidence from Capital Flows

Abstract: This study quantifies the importance of a Global Financial Cycle (GFCy) for capital flows. We use a panel of capital flow data dis-aggregated by direction and type between 1990Q1 and 2015Q5 for 85 countries, and conventional techniques, models and metrics. Since the GFCy is an unobservable concept, we use two methods to represent it: directly observable variables in center economies often linked to it such as the VIX; and indirect manifestations, proxied by common dynamic factors extracted from actual capital flows. Our evidence seems inconsistent with a significant and conspicuous GFCy; both methods combined rarely explain more than a quarter of the variation in capital flows. Succinctly, most variation in capital flows does not seem to be the result of common shocks or stem from observables in a central country like the United States.

Human capital and innovation in Sub-Saharan countries: a firm-level study

Abstract: This paper contributes to the scarce literature on the relationship between human capital and innovation at the firm-level. In this paper we examine whether human capital endowments, such as the general level of schooling within a firm, and practices of firms, such as formal training and employee slack time, have a positive relationship with the innovative output of firms. We contribute by using a more sophisticated approach and analyse how different combinations of human capital elements affect innovation. We study this relationship in Sub-Saharan countries where the general level of human capital is lower compared with developed countries. The results illustrate that internal mechanisms that spur human capital are of particular importance for innovative output in this context. In addition, our results indicate that specific combinations of human capital elements can even have negative effects. In particular, for firms in the manufacturing sector that offer employee slack, the effect of employee ...

Productivity Measurement with Natural Capital

Abstract: Traditional measures of multi-factor productivity (MFP) growth generally do not recognise natural capital as inputs into the production process. Since productivity growth is measured as the residual between output and input growth, it will pick up the growth in unmeasured inputs, which can lead to a bias. The purpose of this paper is to gain a better understanding of the role of natural capital for productivity measurement and as a source of economic growth. To this aim, aggregate economy productivity measures mostly from the OECD Productivity Database are extended by incorporating natural capital as an additional input factor into the production function. More specifically, this paper considers oil, gas and various minerals as natural capital inputs, drawing on data from the World Bank. Results suggest that failing to account for natural capital tends to lead to an underestimation of productivity growth in countries where the use of natural capital in production is declining because of a dwindling natural capital stock. In return, productivity growth is sometimes overestimated in times of natural resource booms, if natural capital is not taken into account as an input factor. The direction of the adjustment to productivity growth depends on the rate of change of natural capital extraction relative to the rate of change of other inputs. The extended framework also makes the contribution of natural capital to economic growth explicit. This can be useful for countries relying on nonrenewable resources to better understand the need to develop other sources of growth, for example by investing in human or productive capital, to prepare for times when resources endowments become scarce. While the measurement of natural capital remains very incomplete, leaving out natural forests, water and soil, the measurement framework can readily be applied to more encompassing data on the natural capital stock, once it becomes available.

Capital Account Liberalization and Aggregate Productivity: The Role of Firm Capital Allocation

Abstract: We study the effects of capital account liberalization on firm capital allocation and aggregate productivity in 10 Eastern European countries. Using a large firm-level data set, we show that capital account liberalization decreases the dispersion in the return to capital across firms, particularly in sectors more dependent on external finance. We provide evidence that capital account liberalization improves capital allocation by allowing financially constrained firms to demand more capital and produce at a more efficient level. Finally, using a model of misallocation we document that capital account liberalization increases aggregate productivity through more efficient capital allocation by 10% to 16%.