Capital Accumulation Paths Research Articles

Automation and economic growth in a task‐based neoclassical growth model

AbstractThis paper incorporates a task‐based approach into the Solow growth model to analyze the effects of automation on economic growth. We find that if task producers smoothly adopt automation technology along the capital accumulation path, sustained growth is possible even without technological progress. This result is brought about by the fact that task automation makes the aggregate production function linear. In addition, we demonstrate that both the rental price of capital and the wage are constant on the growth path. In sum, while the interaction between task automation and capital accumulation can be a pathway for sustained growth in output, it leads to the cease of wage growth in the long run.

Perpetuating inequality through participation in adult learning and education in Russia

ABSTRACT We apply cumulative advantage (CA) theory to understand the social hierarchies behind the accumulation of skills and rewards through Adult Learning and Education (ALE) – formal, informal, and non-formal. Using representative data from the Russian Longitudinal Monitoring Survey (RLMS-HSE), we confirm the assumption of CA theory that advantages are accumulated through ALE, not only within social groups, but also between them. For individuals coming from educationally advantaged families but without higher education, participation in informal non-job-related ALE and formal ALE enhances employment chances. It is therefore a strategy to compensate for the lack of higher education for those coming from educationally advantaged families. For those coming from less educationally advantaged families, higher education moderates the positive effect on wages of non-formal ALE without employer support. Rather than being a way to compensate for between-group inequalities, this type of ALE allows for labour market adaptation for the educationally disadvantaged and has positive effects within the group. We conclude that various types of ALE are institutionalised into different paths of human capital accumulation.

Heavy industry priority development strategy and economic growth: The economic logic of the inverted-U theory and economic history explanation

Based on the objective fact that new China had a weak industrial base during the planned economy period and the policies implemented, this paper constructs a dynamic optimization model that includes the labor-intensive goods sector, the capital-intensive goods sector, and the final goods sector. The basic conclusion of the theoretical model is that there is an inverted-U relationship between total social output per capita and the share of heavy industry capital stock on the optimal dynamic path of capital accumulation with government intervention, i.e., the relationship is positive until a specific threshold is reached, beyond which it becomes negative. The results of the benchmark regressions and endogeneity tests confirm the inverted-U relationship, although the threshold share of heavy industry capital stock differs among the empirical models.

Equilibrium dynamics in a model of growth and spatial agglomeration

AbstractWe present a multiregional endogenous growth model in which forward-looking agents choose their regions to live in, in addition to consumption and capital accumulation paths. The spatial distribution of economic activity is determined by the interplay between production spillover effects and urban congestion effects. We characterize the global stability of the spatial equilibrium states in terms of economic primitives such as agents’ time preference and intra- and interregional spillovers. We also study how macroeconomic variables at the stable equilibrium state behave according to the structure of the spillover network.

Cleaner technology choice in the synergistic control process for greenhouse gases and air pollutions

How to minimize the emission of air pollutants while making decisions about mitigating climate change has become a hot research topic. Considering the homologous homology of the two types of emissions, it is completely feasible to achieve synergistic control for different pollutants through a rational allocation of technology investment. To attain this goal, in this paper, I propose a pollutant synergistic control model. Carbon and sulfur emissions are chose as the major control object. Under a weak condition, I obtained analytical expressions for two types of cleaner technology investment paths, technology capital accumulation paths, and emission reduction paths. Further, characteristics of the respective paths, and the conditions for meeting the corresponding theoretical inflection points or peaks, were analyzed, which lays a foundation for applications of the theory. In particular, this study draws the necessary and sufficient conditions for an internal solution to the choice of cleaner technology, which is a powerful and practical evaluation index. The theoretical predictions were verified with numerical simulation. The investment of the two types of cleaner technologies peaked during the 10th period, and the capital accumulation peaked during 15th period after a slight delay. The actual measured investment and subsidy feedback gains were around the 0.04 and 0.02 levels. In addition, different combinations of targets for sulfur and carbon reduction also simulated scenarios in which the model had different internal solutions. The relevant theoretical exploration work in this paper has deep implications for policy decisions in the real world.

Capitalist development in hostile conjunctures: War, dispossession, and class formation in Turkey

AbstractThis article analyses how periods of geopolitical conflict and violence have affected the development of capitalism and class formation in Turkey. We argue that all major episodes of conflict, violence and war—from forced displacement and ethnic cleansing of the non‐Muslims in the late 19th and the early 20th century, to Kurdish secessionist warfare in the 1990s and the Syrian Civil War—have become major historical turning points in the development of historical capitalism in Turkey. These “hostile conjunctures” transformed capitalism through their direct and indirect effects on dispossession, class formation, and capital accumulation. Although each of these conflicts produced a violent dispossession process, none of them resembled the rural dispossession process in England. To make sense of Turkey's experience, we turn our attention to what we call the “Castilian/Spanish road,” and what Lenin called the “Junker/Prussian road” and the “farmers/American road.” Our analysis shows that these differential paths of dispossession, class formation, and capital accumulation have produced highly variegated rather than uniform outcomes. We conclude that we are living in a new “hostile conjuncture,” which is pregnant to a major structural crisis and is generating the preconditions of another historical transformation in the way capitalism operates.

Equilibrium Dynamics in a Model of Growth and Spatial Agglomeration

We present a multi-regional endogenous growth model in which forward-looking agents choose their regions to live in, in addition to consumption and capital accumulation paths. The spatial distribution of economic activity is determined by the interplay between production spillover effects and urban congestion effects. We characterize the global stability of the spatial equilibrium states in terms of economic primitives such as agents' time preference and intra- and inter-regional spillovers. We also study how macroeconomic variables at the stable equilibrium state behave according to the structure of the spillover network.

Kuznets meets Lucas: structural change and human capital

Abstract This paper develops a multi-sector growth model with human capital accumulation. In this model, human capital induces structural change through two channels: changes in relative prices and changes in the investment rate of physical and human capital. We show that the specifications of the model give rise to a generalized balanced growth path (GBGP). Furthermore, We show that the model is consistent with (i) the decline in agriculture, (ii) the hump-shaped of manufacturing, (iii) the rise of the services sector, and (iv) the path of human capital accumulation in the US economy during the 20th century. Given the findings, We outline that imbalances between physical and human capital contribute to explain cross-country differences in the pace of structural change.

Bubbles and cycles in the Solow\u2013Swan model

We consider a neoclassical one-sector economy in which—in addition to physical capital—there exists a second asset. This asset is unproductive, cannot be consumed, and does not pay dividends. A no-arbitrage condition is imposed so that the two assets are equivalent stores of value. Finally, we assume that consumption (respectively, investment) is a fixed fraction of the sum of aggregate factor income (GDP) and capital gains. In this modified Solow–Swan model, we characterize the conditions under which bubbles can exist, i.e., under which the useless asset can have a positive price. We find that these conditions do not imply that the original Solow–Swan equilibrium is dynamically inefficient, and we demonstrate that asset price bubbles can lead to non-monotonic and even periodic capital accumulation paths.

Marx’s reproduction schemes and multi-sector growth models

This paper provides a critical discussion of Marx’s analysis of simple reproduction, of reproduction on an extended scale, and of the transition from simple to extended reproduction. It challenges various interpretations of Marx’s analysis based on steady-state growth models. By referring to Marx’s original manuscripts on the reproduction schemes, the paper shows that Marx, due to erroneous calculations, never arrived at schemes of reproduction on an extended scale that exhibit steady-state growth. Moreover, it is suggested that Marx identified reproduction on an extended scale with an expansion path of undisturbed capital accumulation, irrespective of whether the latter proceeds in a steady or non-steady manner.

Transition dynamics in the neoclassical growth model: the case of South Korea

AbstractMany successful examples of economic development, such as South Korea, exhibit long periods of sustained capital accumulation. This process is characterized by a gradually rising investment rate along with a moderate rate of return to capital, both of which are strongly at odds with the standard neoclassical growth model that predicts an initially high and then declining investment rate with an extremely high return to capital. We show that minor modifications of the neoclassical model go a long way toward accounting for the capital accumulation path of the South Korean economy. Our modifications recognize that (i) agriculture (which makes up a large share of the aggregate economy in the early stage of development) does not rely much on capital and (ii) the relative price of capital declined substantially during the transition period.

Intergenerational Interactions in Human Capital Accumulation

We analyze an economy populated by a sequence of generations who decide over their consumption levels and the levels of investment in human capital of their immediate descendants. The objective of the paper is to identify the impact of interactions between consecutive generations on the time path of human capital accumulation. To this end, we characterize the Markov perfect equilibrium (MPE) in such an economy and derive the sufficient conditions for its existence and uniqueness. The equilibrium path is computed using a novel constructive approach: extending Reffett and Woźny (2008), we put forward an iterative procedure which converges to the MPE as its limit. To benchmark our results, we also calculate the optimal human capital accumulation paths for (i) a Ramsey-type model with dynastic optimization, and (ii) a model with joy-of-giving altruism. We prove analytically that human capital accumulation is unambiguously lower in the strategic model than in the Ramsey-type dynastic model. We complement our results with a series of numerical exercises.

A Turnpike Theorem Involving a Modified Golden Rule

In the current study, we investigate efficient capital accumulation in a stochastic neoclassical aggregate growth model. The underlying uncertainty is driven by Brownian-motion shocks and the major results do not rely on the specification of production functions. The stochastic balanced path of the capital- labor ratio is naturally derived by a martingale, and the corresponding modified Golden Rule path of capital accumulation is well-defined. The powerful martingale theory is thus employed, and a stochastic turnpike theorem involving the modified Golden Rule is proved. That is, the underlying path of capital accumulation is asymptotically efficient in the sense of consumption maximization. We focus on asymptotic turnpike theorems and our turnpike theorem only relies on the requirement that the modified Golden-Rule path of capital accumulation is reachable in any almost surely finite Markov time. Finally, it is asserted that the modified Golden-Rule path of capital accumulation indeed provides us with a robust turnpike under very weak assumptions.

A Robust Turnpike Deduced by Economic Maturity

In the paper, a one-sector neoclassical model with stochastic growth has been constructed. The key concept of economic maturity is well-defined in the abstract model economy, and also a thorough characterization of the minimum time needed to economic maturity is supplied for the first time. Moreover, it is confirmed that the capital-labor ratio corresponding to the state of economic maturity indeed provides us with a robust turnpike of the optimal path of capital accumulation.

Intergenerational Interactions in Human Capital Accumulation

We analyze an economy populated by a sequence of generations who decide over their consumption and investment in human capital of their immediate descendants. The objective of the paper is twofold: firstly, to identify the impact of strategic interactions between consecutive generations on the time path of human capital accumulation.To this end, we characterize the Markov perfect equilibrium (MPE) in such an economy and derive the sufficient conditions for its existence and uniqueness. We then benchmark our results against an optimal but time-inconsistent policy which abstracts from strategic interactions between generations. We prove analytically that human capital accumulation is unambiguously lower in the “strategic” case than in the optimal, “non-strategic” case.The second objective of the current paper is to work out a functional parametrization of the model, suitable for obtaining clear-cut results on the monotonicity of the (unique) Markov perfect equilibrium policy and the optimal policy. We then carry out a sensitivity analysis under this parametrization, thereby assessing quantitatively the magnitude of discrepancies between human capital accumulation paths whether strategic interactions between consecutive generations are taken into account or not.

Some Swedish Stepping-Stones to Growth Economics

This article investigates original contributions made by Swedish economists to the interpretation of the process of economic growth. Knut Wicksell studied the optimal capital accumulation path and applied the aggregate production function approach to growth with land scarcity. Gustav Cassel developed the notion of steady-state growth and its determinants. Erik Lundberg built on Cassel to put forward the so-called Harrod-Domar condition, and he introduced the “Horndal effect” in growth economics. Ingvar Svennilson advanced a hypothesis about the positive relation between the growth rates of production and productivity, together with the notion that economic growth results from the competition between old and new capital goods. The article relates those contributions to the formation of the field of growth economics by Robert Solow and others.

Asset prices and business cycles under market incompleteness

In this paper, we study the quantitative implications of a real business cycle model where the firm is the capital owner, households are heterogeneous, and markets are incomplete due to restricted asset trade. Since, under these assumptions, the usual firm objective is no longer well defined, several non-standard objectives are incorporated into the model. These include variants of market value maximization and a utility function for the firm. We find that the presence of market incompleteness alters little the behavior of asset returns. On the other hand, the behavior of the macroeconomic aggregates is quite sensitive to the firm objective, which affects the capital accumulation path. In contrast to conventional findings, capital is not necessarily higher when markets are incomplete. In addition, the different capital accumulation effects imply that shareholders with different asset wealth might prefer different firm objectives.

Asset Prices and Business Cycles Under Market Incompleteness

This paper studies the quantitative implications of a real business cycle model where the firm is the capital owner, households are heterogeneous, and markets are incomplete due to restricted asset trade. Since the usual firm objective is no longer well defined under these assumptions, several non standard objectives are incorporated into the model. These include variants of market value maximization and a utility function for the firm. We find that the presence of market incompleteness hardly alters the behavior of asset returns. On the other hand, the behavior of the macroeconomic aggregates is sensitive to the firm objective, which affects the capital accumulation path. In contrast to conventional findings, capital is not necessarily higher when markets are incomplete. In addition, the different capital accumulation effects imply that shareholders with different asset wealth might prefer different firm objectives.

On sustainable growth and collapse: Optimal and adaptive paths

We consider economic growth in the presence of a minimal survival consumption level when preferences are lexicographic giving highest priority to the survival of the current and then all future generations. Knowledge of production is incomplete so future output made possible by current saving must be estimated. The resulting capital accumulation path is compared with the inter-temporally optimal one with full knowledge of the production function. Although previous results with the standard utility function show that for sufficiently strong discounting the adaptive strategy converges to the optimal path, in the present case in several scenarios the effect of adaptive economizing under incomplete information is drastic leading to demise of the economy although long-run survival would be possible.

Short and Long Run Determinants of Private Investment in Argentina

This study provides an empirical analysis of the macroeconomic factors that can potentially affect investment decisions in Argentina in a short, medium and long run perspective. Both the theory and the empirical literature are reviewed in order to identify a private investment function for the last three decades (1970–2000). The results suggest that investment decisions seem to be determined, in the short run, by shocks in returns (exchange rate, trade liberalization) and in aggregate demand. Besides, there is evidence of a “crowding-out” effect of public investment. In the long run, the capital accumulation path seems to be closely dependent on both well-developed financial and credit markets and on perspectives of fiscal sustainability.