Showing papers on "Physical capital published in 2019"

Understanding Weak Capital Investment: the Role of Market Concentration and Intangibles

Abstract: We document that the rise of factors such as software, intellectual property, brand, and innovative business processes, collectively known as “intangible capital” can explain much of the weakness in physical capital investment since 2000. Moreover, intangibles have distinct economic features compared to physical capital. For example, they are scalable (e.g., software) though some also have legal protections (e.g., patents or copyrights). These characteristics may have enabled the rise in industry concentration over the last two decades. Indeed, we show that the rise in intangibles is driven by industry leaders and coincides with increases in their market share and hence, rising industry concentration. Moreover, intangibles are associated with at least two drivers of rising concentration: market power and productivity gains. Productivity gains derived from intangibles are strongest in the Consumer sector, while market power derived from intangibles is strongest in the Healthcare sector. These shifts have important policy implications, since intangible capital is less interest-sensitive and less collateralizable than physical capital, potentially weakening traditional transmission mechanisms. However, these shifts also create opportunities for policy innovation around new market mechanisms for intangible capital.

Relationship between energy, investment, human capital, environment, and economic growth in four BRICS countries.

Abstract: This study empirically evaluates the impact of energy, environmental pollution, human capital, financial development, and physical capital on economic growth in countries like Brazil, India, China, and South Africa (BRICS-4) from 1981 to 2015. Relevant diagnostic tests, the Panel Fully Modified Ordinary Least Squares (F.M.O.L.S.), Robust Least Squares (R.L.S.) methods, and the Dumitrescu-Hurlin Panel causality test are implemented for empirical investigation. The key outcomes from the F.M.O.L.S. and R.L.S. methods indicate that energy consumption, physical capital, human capital, and financial development contribute to economic growth, while environmental pollution attenuates economic growth. Moreover, the Dumitrescu-Hurlin Panel causality test results reveal about the bidirectional and unidirectional causality between energy consumption, environmental pollution, investment, human capital, and financial sector expansion and growth. Thus, based on the findings, this study recommend that the BRICS countries' policy makers need to formulate public policy to ensure adequate energy supply, enhance foreign investments, improve health sector, develop financial sector, and regulate environmental pollution to achieve sustainable development.

The Belt and Road Initiative: What is in it for China?

Abstract: China's outbound investment exceeded inbound investment for the first time in 2015. In years leading up this transition, a maturing demographic transition alongside slowing internal migration and diminishing returns to physical capital investment, all had a role in China's diminished competitiveness in low†wage manufactured exports and the fading of the related growth model. In that context, the 2013 launch of the Belt and Road Initiative (BRI) took place in two stages in two developing countries, Kazakhstan and Indonesia. These launch choices, and the BRI in general are herein elaborated in terms of economic history, geography, and demography. The BRI in turn is considered to be aiming to foster the ongoing development of China, and in doing so also seeks to instigate new era development opportunity for other developing countries. One facilitation channel for the latter is China's concept of “patient capital,†essentially concessional capital, or foreign aid. For China that offers a means via which to internationalise the financial sector and also the Renminbi. Lessons from China's own use of foreign aid and economic development hence serve as an important reference for ongoing scoping of the shape and trajectory of the BRI. To that end, this article sheds light on what is in the BRI for China.

Road infrastructure development and economic growth

Abstract: Stimulating economic growth and development of road infrastructure in economical lagging regions is the goal of many countries. This is because road infrastructure plays a crucial role by providing mobility for the efficient movements of people and goods, as well as providing accessibility to a wide variety of commercial and social activities. However, to achieve a sustainable economic growth, focusing on road infrastructure development alone would not be sufficient. Thus, this study analyse the contribution of road infrastructure development and other socio-economic factors that contributed to economic growth. To shed light on this issue, fixed-effects panel linear regression analysis was conducted using time-series cross-sectional data for 60 countries over the period of 3 decades from 1980 to 2010. The key finding of this study demonstrated that the growth in road length per thousand population, per capita export, per capita education expenditure and physical capital stock per worker contributed positively to economic growth. It was observed that there is an inverted U-shaped dependency relationship between urbanization and economic growth. That is, the economic growth increases at low urbanization levels but decreases once urbanization exceeds a threshold level. Moreover, it was also observed that the growth in road length per thousand population would facilitate export growth. In summary, this study suggest that policies focused on road infrastructure development should be implemented hand-in hand with other socio-economic and urban growth policies, in order to realize a sustainable economic growth.

A culture of rent seeking

Abstract: Tullock [J Dev Econ 67(2):455–470, 1967] introduced the concept of rent seeking and highlighted the social costs associated with collecting and lobbying for or against tariffs, investing in human and physical capital to facilitate or protect against theft, and expending resources to establish a monopoly. A large portion of the rent-seeking literature suggests how formal and informal institutions impact for rent-seeking activities. Culture also affects rent seeking. Communities can have a culture of rent seeking (CoRS), i.e., a perception shared by members of a society that having influence over political allocations is an important and potentially preferable source of private benefit than other avenues of pursuing economic gain. In this paper, we explore how culture affects the nature and level of rent seeking that a society pursues, and whether institutional shifts can strengthen or break down a CoRS.

The Interconnections between Renewable Energy, Economic Development and Environmental Pollution: A Simultaneous Equation System Approach

Abstract: Although the relationship between renewable energy and economic performance has attracted the interest of researchers in recent years, most of the analysis has focused on economic growth, which does not reflect the quality of standards of living. We employ a different approach measuring the impact of renewable energy consumption on the Human Development Index, which also considers qualitative characteristics. Using a simultaneous equation system approach that describes the interrelations between economic variables, renewable energy and pollution emissions with feedback effects, we provide robust evidence for a set of 28 OECD countries over the period 2004 - 2015, that renewable energy, human and physical capital are important factors for explaining the degree of sustainable development. Renewable energy consumption is mostly determined by higher levels of human capital, R&D, and the countries' development stage. Furthermore, the development level, total energy consumption, and the education level are important for explaining environmental pollution.

Smallholder Farmer Adoption of Climate-Related Adaptation Strategies: The Importance of Vulnerability Context, Livelihood Assets, and Climate Perceptions.

Abstract: Despite increased research characterizing the adaptive capacity of households and communities, there are few empirical studies that test why farmers adopt costly climate-related adaptive strategies, which strategies are implemented, and farmers' perceptions of climate changes. In this study, we analyzed determinants for smallholder farmer adoption of adaptation strategies in Chiapas, Mexico. We conducted 291 surveys with landowners in eight coffee farming communities. Farmers were asked which of 21 adaptation strategies they had engaged in, within five categories: migration, storage, land use diversification, community investment, and market exchange. We found the most frequent strategies included planting shade coffee, diversifying crop varieties, shifting sow date, building living walls, reforesting, or engaging in soil conservation. Although many farmers have experienced natural disasters like hurricanes and earthquakes, they were most concerned by long-term threats to crops like coffee rust and higher temperatures, that require costly adaptive investments. We find farmers adapt to climate events because of their vulnerability context (i.e., experience with disasters and distance to markets). Land holdings (i.e., natural capital), farm equipment (i.e., physical capital), and group membership (i.e., social capital), were also key factors influencing adaptation. Finally, farmers with strong perceptions of drought and temperature change were most likely to adapt. These results suggest policy makers should have a multi-pronged approach to: improve farmers' resource base through explicitly promoting adaptation strategies like crop and income diversification; inform climate perceptions through workshops on climate and weather; and strengthen participation in community and producer organizations to increase smallholder adaptation.

Structural change: Pace, patterns and determinants

Abstract: This paper provides a comprehensive assessment of structural change in the world economy. The analysis relies on a newly constructed dataset comprising 169 countries and covering the period from 1991 to 2013. Shapley decompositions are employed to evaluate the pace and pattern of structural change across regions and sub‐regions. Country‐level estimates are then used to conduct an original empirical exercise on the determinants of structural change. The results suggest that labor reallocations (structural change) have played a critical role in enhancing economic performance since the early 2000s, even if they remain comparatively less important than within‐sector productivity improvements. The widespread reallocation of labor from agriculture to the services sectors has been the key driver of structural change. Finally, we find robust evidence that the pace of structural change is significantly shaped by human and physical capital. The policy implication is that investments in education and economic infrastructure are crucial to accelerating structural change.

The macroeconomic burden of noncommunicable diseases associated with air pollution in China

Abstract: Background While a few studies have tried to estimate the economic burden of noncommunicable diseases (NCDs) associated with air pollution, most previous studies have methodological limitations. For example, neither the cost of illness approach nor the value of a statistical life approach accounts for economic adjustment mechanisms (i.e., they do not include substitution of labor lost due to an illness with capital or other workers), and neither approach considers disease impact on physical and human capital. Furthermore, since new evidence shows that air pollution is also linked to diabetes, previous studies did not estimate the economic costs of diabetes associated with air pollution. The total economic costs of NCDs associated with air pollution under a comprehensive framework therefore remained unexplored. Objectives This study uses a human capital–augmented production function framework to analyze and estimate the macroeconomic impact of NCDs associated with air pollution in China in 1990–2030 and in 2015–2030. It makes several contributions—beyond those of the extant literature—to understanding the economic burden of NCDs associated with air pollution. It does this by accounting for economic adjustment mechanisms and by incorporating human capital into the model. Methods In our framework, aggregate output is produced according to a human capital–augmented production function that accounts for the effects of projected disease prevalence. NCDs associated with air pollution affect the aggregate output through three pathways: 1) Mortality effect—when working-age individuals die from a disease, aggregate output decreases because physical capital is an imperfect substitute for the loss of human capital in the production process. 2) Morbidity effect—when working-age individuals suffer from a disease but do not die from it, their contribution to overall output also decreases depending on disease severity; for example, they might work fewer hours or with lower productivity, or they might retire earlier. We also incorporate age-specific human capital to account for education-related productivity differences between members of different cohorts who are differentially affected by NCDs. 3) Treatment cost effect—when households in which members suffer from a disease use part of their savings to cover the out-of-pocket share of their treatment costs, physical capital accumulation diminishes. Our estimates are based on the recently updated Global Burden of Disease epidemiology data, which identify four pathways through which air pollution affects health: cardiovascular diseases, respiratory diseases, cancer, and diabetes. Results Total losses from NCDs associated with air pollution in China in 1990–2030 are estimated to be $1,137 billion (constant 2010 USD) and in 2015–2030 are estimated to be $499 billion (constant 2010 USD). Cardiovascular diseases account for the highest burden, followed by chronic respiratory diseases, diabetes, and cancer. Treatment costs account for nearly 30% of the total economic burden of NCDs associated with air pollution. We also find that the share of economic burden associated with treatment costs is highest for diabetes. This is mainly driven by the fact that, on a per case basis, diabetes has a lower health burden than other diseases associated with air pollution. Discussion The NCDs associated with air pollution impose a large economic burden on China.

Intellectual Capital and Corporate Sustainable Growth: The Indian Evidence

Abstract: Purpose - The present study endeavours to investigate the impact of intellectual capital (IC) and its components on corporate sustainable growth in India. In addition, this study aims to find out the most influential component of IC on corporate sustainable growth in India. Research design, data, and methodology - A sample size of top 139 NSE listed non-financial companies over a time period of five years has been used in this monograph. The impact of intellectual capital and its components on corporate sustainable growth has been examined using the longitudinal data analysis technique. Results - The findings of this study bring to light that intellectual capital (IC) as measured by the M-VAIC model demonstrates a significant impact on corporate sustainable growth. Considerably, the results also reveal that almost all the explanatory variables viz. Physical Capital, Relational Capital, Innovation Capital, and Process Capital exercise notable influence in explaining corporate sustainable growth. Moreover, the results demonstrate Innovation Capital (controlling the effect of Physical Capital) represents the most influential component of IC on corporate sustainable growth. Conclusions - The research findings show that in the Indian context, both physical capital, and IC (overall), as well as its components, play a crucial role to explain corporate sustainable growth.

Research on the Intergenerational Transmission of Poverty in Rural China Based on Sustainable Livelihood Analysis Framework: A Case Study of Six Poverty-Stricken Counties

Abstract: China’s complicated and diverse poverty problems gradually emerged as poverty alleviation efforts deepened and rural urbanization progressed. Among these problems, the intergenerational transmission of poverty (ITP) is the most prominent and is an entrenched issue in rural China. This study selects six typical poverty-stricken counties in the eastern, central, and western regions of China on the basis of geography and uses the transformation matrix method and a regression model to analyze the regional differentiation characteristics of ITP. We further explore its impact mechanisms based on a sustainable livelihood analysis framework with the following results: (1) ITP in rural China exhibits the phenomenon of income-stratified transmission, and the groups at both ends of the low-income spectrum are more prone to having ITP; (2) ITP and the intergenerational mobility of income for different income levels have different spatial distribution characteristics, with these intergenerational relationships exhibiting a reverse variation trend in the eastern region, while exhibiting a codirectional variation trend in the central and western regions; (3) there are differences in the subsistence livelihood capital, which affect ITP in different regions. Financial capital has a significant impact on ITP across all of China. Natural capital has a significant impact on the eastern region, and physical capital plays a significant role in the central region, while the western region is greatly affected by both human and physical capital. In view of the differences in the influence of livelihood capital on ITP in different regions, China should formulate policies to accurately address ITP in order to narrow regional differences and accelerate the comprehensive construction of a financially affluent society.

Decomposing Firm Value

Abstract: What are the economic determinants of a firm's market value? We answer this question through the lens of a generalized neoclassical model of investment with physical capital, quasi-fixed labor, and two types of intangible capital, knowledge and brand capital. We estimate the structural model using firm-level data on U.S. publicly traded firms and use the estimated parameter values to infer the contribution of each input for explaining firm's market value in the last four decades. The model performs well in explaining both cross-sectional and time-series variation in firm's market values across industries, with a time-series R2 of up to 61%, and a cross-sectional R2 of up to 95%. The relative importance of each input for firm value varies across industries and over time. On average, physical capital accounts for 30% to 40% of firm's market value, installed labor force accounts for 14% to 22%, knowledge capital accounts for 20% to 43%, and brand capital accounts for 6% to 25%. The importance of physical capital for firm value decreased in the last decades, while the importance of knowledge capital increased, especially in high-tech industries. Our analysis provides direct empirical evidence for the importance of labor and intangible capital inputs for understanding firm value.

Structural breaks, international tourism development and economic growth

Abstract: This study examines the causal relationships between tourism, physical capital, human capital, household consumption expenditure and economic growth for the period 1981–2014 using Structural Breaks...

Inequality and growth: industry-level evidence

Abstract: Using a comprehensive data set of 22 industries in 86 countries over the period 1980–2012, we empirically identify the effect of inequality on industry-level value added growth. We show that an unequal income distribution increases the growth rates of physical-capital-intensive industries and reduces the growth rates of human-capital-intensive industries by lowering human capital and raising physical capital accumulation. Our study suggests that the empirical difficulty to identify a monotonic relationship between inequality and aggregate growth reflects differences in the relative importance of human and physical capital in a country’s production structure.

The Composition of Capital and Cross-country Productivity Comparisons

Abstract: The role of physical capital is typically found to be limited in accounting for differences in GDP per worker, but this result may be because capital is customarily assumed to be a homogenous unit. This assumption is misleading, as different types of capital assets have different marginal products and richer countries tend to invest more in high-marginal product assets. We take this perspective to a global dataset, the Penn World Table, to improve cross-country productivity comparisons. We show that, properly measured, differences in capital input can account for a greater share of income variation, but (total factor) productivity differences remain dominant.

Financial development and economic growth: long-run equilibrium and transitional dynamics

Abstract: We analyze the impact of financial development on economic growth. Differently from previous studies that focus mainly on balanced growth path outcomes, we also analyze the transitional dynamics of our model economy by using a finance‐extended Uzawa–Lucas framework where financial intermediation affects both human and physical capital accumulation. We show that, under certain rather general conditions, economic growth may turn out to be non‐monotonically related to financial development (as suggested by the most recent empirical evidence) and that too much finance may be detrimental to growth. We also show that the degree of financial development may affect the speed of convergence, which suggests that finance may play a crucial role in determining the length of the recovery process associated with exogenous shocks. Moreover, in a special case of the model, we observe that, under a realistic set of parameters, social welfare decreases with financial development, meaning that even when finance positively affects economic growth the short‐term costs associated with financial activities more than compensate their long‐run benefits.

Across the Sea to Ireland: Return Atlantic Migration before the First World War

Abstract: Are return migrants 'losers' who fail to adapt to the challenges of the host economy, and thereby exacerbate the brain drain linked to emigration? Or are they 'winners' whose return enhances the human and physical capital of the home country? These questions are the subject of a burgeoning literature. This paper analyze a new database culled from the 1911 Irish population census to address these issues for returnees to Ireland from North America more than a century ago. The evidence suggests that those who returned had the edge over the population as a whole in terms of human capital, if not also over those who remained abroad.