Rate Of Capital Accumulation Research Articles

Has International Trade in Saving Improved US Economic Welfare?

Over the past decade international policy‐makers have perceived the current account deficit of the world’s largest foreign borrower economy, the United States, as a threat to global economic and financial stability. Yet, by bridging the US domestic saving‐investment gap, capital inflow that matched the huge US current account deficit also enabled a faster rate of domestic capital accumulation than home saving alone would have permitted. Consistent with the theory of international capital movements, this study identifies and compares the respective contributions of domestic and foreign saving to US gross domestic product per worker over the two decades prior to the onset of the US banking crisis. By revealing that foreign borrowing contributed significantly to raising US output and hence living standards over this period, it adds a new dimension to the debate about global imbalances.

The Innovation Pause Hypothesis and the Strategy of Modernization

The Innovation Pause Hypothesis is developed in the article. According to this hypothesis, the current crisis can be explained by the exhaustion of possibilities of existing general purpose technologies and by the delay of new ones in combination with overoptimistic expectations due to a long period of rapid economic expansion. If this hypothesis is correct, then it is quite plausible that a significant period of time will be required before fast growth is restored in Western economies. Russia gets an additional chance to decrease the gap between Russian and Western economic productivity provided that an efficient mechanism of technology borrowing is created. An appropriate strategy must include a set of measures aimed at: increasing the countrys adaptive capacity; designing an interactive planning system in order to develop large-scale modernization projects; increasing the capital accumulation rate by stimulating savings and improving the credit system.

SHAREHOLDER VALUE ORIENTATION, DISTRIBUTION AND GROWTH-SHORT- AND MEDIUM-RUN EFFECTS IN A KALECKIAN MODEL

We discuss the effects of rising shareholder power on distribution and capital accumulation in a Kaleckian model. Increasing shareholder power is associated with decreasing managements' animal spirits, on the one hand, and increasing dividends distributed to shareholders, on the other hand. In the short run, increasing shareholder power may either have positive ('finance-led'), negative ('normal') or intermediate ('profits without investment') effects on capacity utilisation, profits and capital accumulation. In the medium run, the positive ('finance-led') effects may be maintained in a stable environment under very special conditions, whereas the negative ('normal') and the intermediate ('profits without investment') effects turn into cumulative disequilibrium processes with falling rates of capacity utilisation, profits and capital accumulation and rising debt- and rentiers' equity-capital-ratios. (author´s abstract)

An Historical Materialist Appraisal of Friedrich List and his Modern-Day Followers

The purpose of this article is to discuss catch-up development as it has been conceptualised by writers operating within the Listian framework. The rationale for this is that combating global poverty and achieving sustainable economic growth is at the centre of most debates on development in the global south. However, at present anti-poverty strategies are pursued within a broad neoliberal framework, despite the fact that increasing numbers of the world’s population (lay and academic) perceive neoliberalism to be extremely damaging for the world’s poor (cf. Weisbrot et al. 2001). In strong opposition to neoliberal development strategy stands a body of thought that is growing in popularity (at least within the academy and some policy circles) and draws on Friedrich List’s original critique of the British liberal economists Adam Smith and David Ricardo. This article suggests that neo-Listian development economics does offer realistic and achievable catch-up policies to elites in developing countries. However, by drawing on and extending Marx’s original critique of List, this article also argues that while such policies may achieve faster rates of capital accumulation than neoliberal policies, they do not necessarily serve the interests of the larger part of the populations of late developing countries, as their proponents claim. It argues, further, that for such policies to be applied in ways that do benefit the world’s poor, they need to be integrated into what is conceptualised here as social development, and should be conceptualised not as policies to stabilise capitalism in the long term, but as part of a movement towards socialising the economy under democratic control.

Evolutionary Growth Theory

We begin by outlining competing stylised facts about economic growth and then set out the relations between structural change and aggregate productivity growth contingent on the evolution of the pattern of demand. We then introduce the concept of an industry level technical progress function and show how rates of technical progress are mutually determined as a consequence of increasing returns and the changing distribution of demand. We next sketch a macroeconomic closure of the evolutionary process, expressed in terms of the mutual determination of rates of capital accumulation and rates of productivity growth. In the final section we elaborate upon the restless nature of innovation-based economic growth and the conditions under which Nicholas Kaldori?½s stylised facts are compatible with the Clark-Kuznets stylised facts. We may summarise our perspective quite sharply. What distinguishes modern capitalism is not only its order imposing properties that lead to the self organisation of the economy, but also the self transforming properties that create wealth from knowledge and, in so doing, induce the further development of useful knowledge. The manner in which self-organisation and self-transformation interact in terms of adjustments to the composition of demand, as well as the structure of technology and production, is at the core of this essay

Financial Innovation and Economic Growth - A Theoretical Approach

This paper studies the economic growth implications of financial innovations that emerge in more sophisticated and complete financial markets. Financial innovations in the form of new financial instruments, services, institutions, technologies, and markets mobilise financial surpluses from ultimate savers and channelizes them into most productive investment avenues thereby raising the rate of capital accumulation, and hence, the rate of economic growth.

MICRO EMPIRICAL RESULTS OF A KALECKIAN-TYPE CAPITAL ACCUMULATION MODEL COMPARED WITH MACRO RESULTS FOR SOME EUROPEAN ECONOMIES

A micro economic model of the rate of capital accumulation that corresponds to a macro Kaleckian-type post-Keynesian investment function is hypothesized. Firm-level accounting data on industrial and commercial firms over the time period 1994–2000 for three European economies and the USA are used to test the consistency of the micro model with the macro model of Hein and Ochsen (2003, Metroeconomica, 54, pp. 404–33). The micro empirical results were very consistent with the macro results, suggesting a strong micro foundation to the macro investment function. In addition country differences and industry differences were included in the analysis.

Does Urbanization Foster Human Capital Accumulation?

The literature on growth theory has pointed to the importance of human capital in order to explain the process of economic development. In the present study, we highlight the role played by cities in fostering human capital accumulation. More particularly, building on a simple urban economics model, we perform cross-country estimations, measuring the relation between human capital accumulation and urbanization. Our results support the result according to which more urbanization induces higher rates of human capital accumulation, but only above a certain threshold level of development. This latter result raises policy concerns on issues related to over-urbanization.

Alternative Social Security Systems and Growth

Demographic trends in most developed economies are characterized by rising longevity and decreasing birthrates. These trends endanger the sustainability of the current public pension systems. Therefore social security reform proposals are on the agenda in many countries. This paper demonstrates that the analysis of fiscal sustainability of social security must include an additional dimension of public policy, namely education funding. Indeed, the productivity growth of future workers, which depends on human capital accumulation, may outweigh the impact of the demographic problem. This fact is true under both pay-as-you-go (PAYG) and fully funded (FF) social security system. We consider an OLG economy where government, in addition to running social security, also funds education of future workers by means of taxes collected from the current ones. The education tax rates are chosen, in each period, by a majoritarian rule among the relevant constituents. We demonstrate that while the FF system results in relatively higher rates of physical capital accumulation, then under some conditions, other things equal, the PAYG social security regime leads to the choice of relatively higher respective levels of education tax rates in all generations, and thereby to higher rates of human capital accumulation.

Clash of Career and Family: Fertility Decisions after Job Displacement

In this paper we investigate how fertility decisions respond to unexpected career interruptions which occur as a consequence of job displacement. Using an event study approach we compare the birth rates of displaced women with those of women unaffected by job loss after establishing the pre-displacement comparability of these groups. Our results reveal that job displacement reduces average fertility by 5 to 10% in both the short and medium term (3 and 6 years) and that these effects are largely explained by the response of white collar women. Using an instrumental variable approach we provide evidence that the reduction in fertility is not due to the income loss generated by unemployment but arises because displaced workers undergo a career interruption. These results are interpreted in the light of a model in which the rate of human capital accumulation slows down after the birth of a child and all specific human capital is destroyed upon job loss.

A dinâmica da taxa de lucro, da taxa de juros e do grau de utilização da capacidade produtiva em um modelo pós-keynesiano

O objetivo do presente artigo é analisar, por meio de simulação computacional, as trajetórias dinâmicas da taxa de acumulação de capital, da taxa de lucro, da taxa de juros e do grau de utilização da capacidade diante de mudanças exógenas do ritmo do progresso tecnológico e da propensão a poupar dos capitalistas. A simulação foi realizada a partir de um modelo macrodinâmico pós-keynesiano que leva em consideração a interação entre o lado real e monetário da economia. Dentre outros resultados, as simulações mostraram que: (i) a taxa de lucro é significativamente elástica com relação a um choque tecnológico positivo, ao passo que a taxa de juros e o grau de utilização da capacidade são pouco sensíveis a esse tipo de choque; e (ii) a confirmação do paradoxo da frugalidade, segundo o qual o aumento da propensão a poupar dos capitalistas acaba por reduzir o nível da poupança agregada, a taxa de lucro e o grau de utilização da capacidade.

Employment Effects of International Factor Mobility : A Theoretical Approach with Heterogenous Labor

In many countries the difference in labor market performance for skilled and unskilled workers has increased over the past decades. While an extended literature exists on the employment effects of trade, less is known about the effects of factor mobility. Based on the “labor market flow approach”, we develop a model of persistent structural unemployment for skilled and unskilled workers. Within this model the effects of capital mobility and migration are analyzed. Given that real and human capital are complements we find that skilled and unskilled worker will both gain from capital inflows. Within each labor market segment, the effects of labor inflows is always negative. The cross effects of labor infows, however, are non-symmetrical: On the one hand, an inflow of unskilled labor negatively affects the unskilled segment, but will not affect the unemployment rate of skilled workers. On the other hand, an inflow of skilled labor will always negatively affect the unemployment rate in both segments of the labor market. If policy makers would like to avoid these effect, the number of unskilled must simultaneously be decreased, the rate of internal real capital accumulation must be increased or real and human capital must be imported as a bundle.

Monetary Policy and Business Cycles with Endogenous Entry and Product Variety [with Comments and Discussion

This paper studies the role of endogenous producer entry and product creation for monetary policy analysis and business cycle dynamics in a general equilibrium model with imperfect price adjustment. Optimal monetary policy stabilizes product prices, but lets the consumer price index vary to accommodate changes in the number of available products. The free-entry condition links the price of equity (the value of products) with marginal cost and markups and hence with inflation dynamics. No-arbitrage between bonds and equity links the expected return on shares, and thus the financing of product creation, with the return on bonds, affected by monetary policy via interest rate setting. This new channel of monetary policy transmission through asset prices restores the Taylor Principle in the presence of capital accumulation (in the form of new production lines) and forward-looking interest rate setting, unlike in models with traditional physical capital. We also study the implications of endogenous variety for ...

Por que a poupança externa não promove crescimento

Why foreign saving fail to cause growth. The present paper is a formalization of the critique of the growth with foreign savings strategy. Although medium income countries are capital poor, current account deficits (foreign savings), financed either by loans or by foreign direct investments, will not usually increase the rate of capital accumulation or will have little impact on it in so far as current account deficits will be associated with appreciated exchange rates, artificially increased real wages and salaries and high consumption levels. In consequence, the rate of substitution of foreign savings for domestic savings will be relatively high, and the country will get indebted to consume, not to invest and grow. Only when there are large investment opportunities, stimulated by a sizeable difference between the expected profit rate and the long term interest rate, the marginal propensity to consume will get down enough so that the additional income originated from foreign capital flows will be used for investment rather than for consumption. In this special case, the rate of substitution of foreign for domestic savings tend to be small, and foreign savings will contribute positively to growth. Key-words: foreign savings, economic growth. JEL classification: E1, E2, F0, F3, O11.

Macrodynamics of debt regimes, financial instability and growth

This paper develops a post-Keynesian dynamic model of capacity utilisation and growth, in which the supply of credit-money is endogenous and firms' debt position—and thus the financial fragility of the economy à la Hyman Minsky—is explicitly modelled. The interest rate is set by banks as a markup over a base rate exogenously determined by the monetary authority. The banking markup varies with changes in capacity utilisation, while the debt ratio varies with changes in the rates of interest, capital accumulation and growth. Regarding dynamics, it is shown the possibility of relating the stability properties of a system with the interest rate and the debt ratio as state variables to the prevailing Minskyan regime—hedge, speculative or Ponzi.

Crossing Hubbert’s peak: Portfolio effects in a growth model with exhaustible resources

This paper elaborates a two-class growth model with an exhaustible resource (“oil”) and an alternative technique (“solar”). Bequest savers accumulate wealth, consisting of capital and oil, saving a constant fraction of their end-of-period wealth. The price of oil obeys Hotelling’s rule. Rising oil prices and the depletion of oil supplies create portfolio effects on the accumulation of capital. When growth is constrained by an exogenously increasing labor force, these wealth effects express themselves in changes in the distribution of income, which first shifts toward profits and then shifts back toward wages as the oil stocks approach depletion. When growth is constrained by capital (the labor force is endogenous), the portfolio effects express themselves in changes in the rate of capital accumulation, which first declines and then rises sharply as the oil stocks approach depletion.

Government spending, capital accumulation and the optimal policy rule: The role of public service capital

In this paper, we modify the Djajić [Djajić, S., 1987. “Government Spending and the Optimal Rates of Consumption and Capital Accumulation,” Canadian Journal of Economics 20, 544–554.] model in such a way that government consumption expenditure provides utility to households via the total stock of government services rather than the government consumption flow alone. By using such a framework, we show that the optimality condition for the public service capital stock is the marginal rate of substitution between public service capital and consumption that equals the intertemporal marginal rate of transformation between the two goods. In addition, we show that the relationship between private consumption and public service capital in a household's utility plays an important role in determining the transitional behavior of relevant variables. We also examine the second-best government consumption expenditure policy. By contrast, in the standard flow specification, e.g., Turnovsky and Brock [Turnovsky, S.J. and Brock, W.A., 1980. “Time Consistency and Optimal Government Policies in Perfect Foresight Equilibrium,” Journal of Public Economics 13, 183–212.], Ihori [Ihori, T., 1990. “Government Spending and Private Consumption,” Canadian Journal of Economics 23, 60–69.], and Turnovsky and Fisher [Turnovsky, S.J. and Fisher, W.H., 1995. “The Composition of Government Expenditure and its Consequences for Macroeconomic Performance,” Journal of Economic Dynamics and Control 19, 747–786.], the second-best government consumption expenditure is decided on the basis that the marginal utility of consumption is equal to the discounted sum of the marginal utility of the government's flow spending.

HIV/AIDS, human capital, and economic growth prospects for Mozambique

This paper examines the implications of AIDS deaths for economic growth prospects for Mozambique. Human capital accumulation through education receives particular attention. Education and human capital transition matrices are estimated using a minimum cross entropy approach. Consistent with evidence from Tanzania and elsewhere, HIV/AIDS is assumed to slow the rate of human capital accumulation. Using a dynamic computable general equilibrium approach, reduced rates of human and physical capital accumulation are shown to interact strongly with technical change that is biased towards physical and human capital. The results point to the education sector as a major and policy sensitive channel of impact.

Growth and income inequality: a canonical model

We develop an endogenous growth model with elastic labor supply, in which agents differ in their initial endowments of physical capital. In this framework, the growth rate and the distribution of income are jointly determined. The key equilibrating variable is the equilibrium labor supply. It determines the rate of return to capital, which in turn affects both the rate of capital accumulation and the distribution of income across agents. We then examine the impact of various structural shocks on growth and distribution. We find that faster growth is associated with a more unequal, contemporaneous distribution of income, consistent with recent empirical findings.

Dividend Reinvestment, Price Appreciation and Capital Accumulation

Studies of historical stock market performance invariably focus on total shareholder return (TSR). Contrary to its name, TSR does not represent the return earned by equity investors but is instead the capital accumulation rate investors achieve if they purchase shares at the start date, reinvest all dividends to buy additional shares, and hold all shares to the terminal date. Investors who use historical TSR rates as a point of departure for establishing their assumed capital accumulation rates can be misled in two ways. First, because only the rare investor can afford to reinvest all dividends and sell no shares over a lifetime, the capital accumulation rate will almost always be lower than the TSR rate. Second, the remarkable historical growth in accumulated capital from reinvested dividends can mistakenly persuade some investors that dividends, rather than price appreciation, govern investment performance. Departures from 100% dividend reinvestment affect capital accumulation, and once investors make the dividend reinvestment decision, capital accumulation depends entirely on price appreciation. <b>TOPICS:</b>Long-term/retirement investing, equity portfolio management, wealth management