Capital Intensity Of Production Research Articles

Informalization of the formal sector: Evidence from India's manufacturing industries

Abstract The employment structure of India's formal manufacturing sector has undergone substantial changes since the early 2000s with a steep rise in the use of contract workers in place of directly hired workers. Much of the existing literature has attributed the widespread use of contract labour to India's rigid employment protection legislation. The resulting informalisation of the workforce in the organised sector raises concerns about the sustainability of employment growth. Using a 14-year plant-level panel data from the Annual Survey of Industries, we find that in addition to labour market rigidities and the existence of a wage differential between contract and directly hired workers, plants in the organised manufacturing sector have another important incentive to hire contract workers. Plants appear to be using contract workers to their strategic advantage against the directly hired workers to keep their bargaining power and wage demand in check. Importantly, the strength of this bargaining channel varies across plants depending on their capital intensity of production, size and existing contract worker intensity.

A commodity exporting economy under “the new reality”: Aggregate and structural changes

“The new reality” means a commodity-exporting economy cannot use its accumulated fx-reserves or attract new fx-debt to smooth abrupt import reduction amid slower decline of income flow from commodity export. We use a modified version of the Ramsey—Cass—Koopmans’ model to study aggregate and structural changes in the economy under these conditions in the shorter and longer run. The results show that the potential GDP of the economy which cannot effectively substitute its import should decline both in the shorter and longer run. However, full and effective import substitution does not guarantee households would restore their volume of consumption. The reasons are, first, labor reallocation into the import-substituting sector that reduces availability of labor for other sectors and, second, the need to keep capital intensity of production at a higher level. If the efficiency of import substitution is asymmetric and biased to goods for final consumption relative to goods for investments, the structure of imported goods becomes biased to the later. Moreover, goods for final consumption experience very intensive import substitution in such a case. However, it does not result in the restored level of total consumption. The results may imply higher consumer goods inflation in practice. If import substitution is extremely inefficient in both consumption and investment goods’ production, households cannot avert a huge reduction of their welfare.

Evaluation of the effectiveness of innovative development in countries with different types of national innovation systems

Today, in the context of crisis phenomena, limited resources, external challenges and threats, the key importance in managing the economic systems of states is to maintain economic growth and sustainable economic development. One of the main factors for ensuring economic growth is the active introduction of innovations in various spheres of social production. With the help of innovations, the growth of the main macroeconomic indicators is carried out by reducing material costs (reducing energy intensity, capital intensity of production) and without additional involvement of labor in production. In the scientific literature, there are various models of the transition of the state’s economic system to the path of innovative development. The main condition for the effectiveness of the innovation process in the state is the integrity of its institutional infrastructure. In a broad sense, such an infrastructure is understood as a national innovation system (NIS). In the economic literature, there are three main types of NIS: Euro-Atlantic, Asian, and alternative. The article assesses the dependence of economic growth on the innovative development of states with different types of NIS. The factors that have the greatest impact on economic growth in the Russian Federation are identified, and the main directions for the development of innovation activities are formed, depending on the identified factors.

ОЦІНКА ДІЯЛЬНОСТІ ГАЛУЗІ ПОСТАЧАННЯ ЕЛЕКТРИЧНОЇ ТА ТЕПЛОВОЇ ЕНЕРГІЇ В УКРАЇНІ В КОНТЕКСТІ ФОРМУВАННЯ ПРІОРИТЕТІВ ЕНЕРГЕТИЧНОЇ БЕЗПЕКИ

The article highlights the current state and main trends in the development of electricity, gas, steam and air conditioning in Ukraine for 2016–2020. The provision of the industry with production resources is established. There is an increase in the capital intensity of production, an increase in the value of fixed assets, tools against the background of a decrease in the number of full-time employees in the industry. The supply of electricity, gas, steam and air conditioning in Ukraine is one of the most powerful, accounting for about 25% of industrial sales. This has a significant impact on trends in economic activity of enterprises, the cost and competitiveness of domestic products, quality of life and social protection. Over the past 5 years, the country's electricity production has been steadily declining. This was primarily due to a reduction in the production of thermal power plants. Assessment of the dynamics of electricity production in terms of the main sources of supply in Ukraine indicates a change in its structure. The dominant role in electricity production belongs to nuclear power plants, which consistently occupy about 50%. Production of electricity from alternative sources is growing in Ukraine, its share in 2020 is more than 10%. The article compares capacity and energy production on the basis of renewable sources of individual countries in Europe and Ukraine. According to the data of 2020, it has been established that Ukraine has mastered investments in the installation of solar panels, windmills, hydroelectric power plants, thermal springs, but they do not produce energy in accordance with their capabilities. Consumer price indices for the main groups of energy goods and services in Ukraine for 2016–2020 were monitored. There is a constant excess of prices for electricity and heat compared to the general consumer price index for goods and services. There is an increase in the price disparity in the main sectors of the economy, which requires state control and regulation. Prospects for further development of Ukraine's electricity and heat supply sector based on the use of alternative sources and the formation of priorities of the strategy of socio-economic development for energy security and energy saving in accordance with European priorities are proposed.

СИСТЕМНАЯ ИНТЕГРАЦИЯ КАК ОБЪЕКТИВНАЯ РЕАЛЬНОСТЬ ЭКОНОМИЧЕСКОЙ УСТОЙЧИВОСТИ ОРОШАЕМОГО ЗЕМЛЕДЕЛИЯ

The article examines the influence and relationship of factors of production – capital and labor, on the economic stability of facilities operating in the system of irrigated agriculture, in the production of agricultural products. The problem of sustainable functioning is of particular relevance for farms with irrigated agriculture due to the high capital intensity of production using irrigation. The solution of sectoral problems is considered from the point of view of real economic processes of systemic integration taking place in the agro-industrial complex of the region. Research on the financial sustainability of enterprises is carried out using a system of relative indicators (financial ratios). The share of the value of the main reclamation funds is 35.5% of the main production funds of the agro-industrial complex of the region, which indicates a high capital intensity of production using irrigation technologies. Research was carried out on the basis of agricultural producers’ statistics using irrigation technologies. The degree of sustainability of their operation was assessed through the potential of the production potential of irrigated agriculture based on various economic indicators. The relationship considered taking into account the basic parameters of performance. The article uses the most universal and acceptable multiplicative Cobb-Douglas model for the agricultural industry, which represents the interconnection of factors of production – in our case, to quantify the relationship between fixed assets and labor resources and their impact on the sustainability of production. In modern conditions, the main criteria for the stability of structural units (facilities) in irrigated agriculture are economic parameters that make it possible to measure the costs and profits from the sale of products and provide each economic entity with a long-term cost-effective economy. The results show a relative change in the volume of output, expressed as a percentage, with a relative increase in the corresponding factor of production by 1%.

Why the Effects of Oil Price Shocks on China’s Economy are Changing

Some studies on developed economies have revealed that the impacts of oil price shocks have decreased while conclusions about China remain occluded. We investigate the changing effects of oil price shocks on China’s macroeconomy and discuss the causes. A time-varying parameter vector autoregressive (VAR) model reveals that impacts of oil price shocks on China’s economy have shown a downward trend since 1997. The responses of the real output are much greater and last longer than those of inflation. Then a new Keynesian dynamic stochastic general equilibrium model is developed to synthetically explore the causes. The results indicate that decreasing oil intensity and monopoly power reduce the effects of oil price shocks, while increasing capital intensity in production amplifies them. Other factors-such as changing price stickiness, deregulation of refined oil prices, and shifts in monetary policy targets-have limited effects on the relationship between oil price shocks and China’s macroeconomy.

Indeterminacy in a matching model of money with productive government expenditure

This study explores the effects of inflation on economic growth in a two-sector monetary search-and-matching model with productive government expenditure. We find that when labor intensity of production in the centralized market is below a threshold, the economy features a unique balanced growth path along which inflation reduces growth so long as capital intensity of production in the decentralized market is positive. When labor intensity in the centralized market is above the threshold however, the economy may feature multiple balanced growth paths. Multiple equilibria arise when the matching probability in the decentralized market is above a threshold. In this case, the high-growth equilibrium features a negative effect of inflation on economic growth whereas the low-growth equilibrium may feature a negative, a positive or a non-monotonic effect of inflation on growth. When the matching probability is above the threshold but not too high, the low-growth equilibrium is locally determinate whereas the high-growth equilibrium is locally indeterminate and subject to sunspot-driven business cycles around it. Finally, when the matching probability is sufficiently high, both equilibria are locally determinate, and hence, either equilibrium may emerge in the economy.

Do Court Delays Distort Capital Formation?

We study how longer bankruptcy trials affect the size, structure and allocation of corporate capital. Exploiting a legal reform that reorganised the judicial districts in Italy, we find that the interquantile reduction in the length of bankruptcy trials increases the firm's capital stock and capital intensity of production by more than 10%. Significantly, our results provide two novel findings on the real and allocational effects of legal institutions. First, poor enforcement of financial contracts leads firms to under-allocate capital in intangible assets. Second, it exacerbates misallocation by preventing the optimal allocation of physical and intangible assets towards firms with high capital return.

Research of management subsystems for the development of organizational capital of management companies

The article examines the issues of managing the organizational capital of integrated financial groups in the context of financial globalization. It is noted that integrated financial groups at the present stage of their development are faced with the urgent need to invest in improving the skills of employees of management companies to reduce risks and improve their financial stability. The hypothesis about the impact of a decrease in the capital intensity of production on the growth of the market price of shares is substantiated. The urgency of solving these and other problems is determined by the urgent need to implement a competency-based approach to the business development of management companies.

Investment-innovation analysis of interactions between technological and economic aspects of industrial development of mineral resources in the Arctic

The methodological foundations of investment-innovation analysis for the objective determination of innovation-active enterprises are considered. The particular importance of managing the implementation of new technologies for industrial enterprises operating in the Arctic is noted. The main factors that influence the change in the manufacturability level coefficient value which reflects the proportional dependence of the material intensity of the product from the capital intensity of production are identified. The characteristic of each factor is presented. It was determined that the main influence on the change in the values of the coefficient is made by the rate of renewal of the fixed assets active part of enterprises - machines, equipment and vehicles. The sequence of investment-innovation analysis implementation by the retrospective data of enterprises is presented. A method for determining the completion period of each of the six stages of the technological development life cycle is shown. It is determined that the decrease of the manufacturability level coefficient value or the instability of the stages of the production process life cycle are associated with the low efficiency of the enterprise management process what makes it possible to carry out an economic assessment of the damage from increase of production cost price and decrease of profit as a result of poor management at any level of hierarchy.

Ability-Biased Technical Change and Productivity Bonus in a Nested Production Structure: A Theoretical Model with Endogenous Hicks-Neutral Technology Spillover

This paper develops a model of endogenous trade-mediated productivity spillover in which jointly trade-intensity, capital-intensity of production, and skill-intensity for adoption of technology from an exogenously available stock of world knowledge determine firm’s productivity. The representative firm, in the process of maximising profit (or minimising costs), takes into account the benefits of technological improvements embodied in imported intermediates. Sectors with higher skilled labour intensity will have an advantage in extracting the ‘bonuses’ from spillovers. The framework is useful for exploring technology adoption, considering wage premium, investigating innovative changes in sectors, and analysing productivity differences.

Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence

This paper documents the downward trend in the labor share of global income since the early 1990s, as well as its heterogeneous evolution across countries, industries and worker skill groups, using a newly assembled dataset, and analyzes the drivers behind it. Technological progress, along with varying exposure to routine occupations, explains about half the overall decline in advanced economies, with a larger negative impact on middle-skilled workers. In emerging markets, the labor share evolution is explained predominantly by global integration, particularly the expansion of global value chains that contributed to raising the overall capital intensity in production.

Mobile Capital, Optimal Tariff, and Tariff War

By an intra-industry trade model with mobile capital, we examine the characteristics of optimal tariffs and tariff wars. In contrast to folk wisdom on optimal tariffs, we show that when capital intensity in production is high, larger countries can apply lower tariff rates, tariffs may behave as strategic complements, and smaller countries can win tariff wars. This occurs when tariffs have a strong impact on output expansion, and the negative effect of tariffs on foreign demand based on the increase in capital rent plays a key role. In addition, we can show that in a tariff war between two symmetric countries, a rise in capital intensity lowers the equilibrium tariff rate and the welfare loss in ratio. In other words, higher intensity of mobile capital alleviates excessive tariff competition.

Importing and Firm Export Performance: New Evidence from South Africa

AbstractThis article uses firm‐level data from company income tax and customs declarations from South Africa to analyse the complementary relationship between direct access to imported intermediate inputs and firm exports in the manufacturing industry. There are two main findings. The first is on firm heterogeneity, showing that firms that import and export consistently demonstrate premiums in terms of productivity, employment, wages and capital intensity in production compared to firms that do not trade, or only export or import. The second supports the hypothesis that importing raises exports, especially if inputs are sourced from advanced economies.

Why is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence

This paper documents the downward trend in the labor share of global income since the early 1990s, as well as its heterogeneous evolution across countries, industries and worker skill groups, using a newly assembled dataset, and analyzes the drivers behind it. Technological progress, along with varying exposure to routine occupations, explains about half the overall decline in advanced economies, with a larger negative impact on middle-skilled workers. In emerging markets, the labor share evolution is explained predominantly by global integration, particularly the expansion of global value chains that contributed to raising the overall capital intensity in production.

The Spillover Effects of Public Investment: Implications for Formal and Informal Sector Firms in India

This paper uses firm-level data on formal and informal production in the manufacturing sector in India to examine the sectoral consequences of government investment in public infrastructure. The average output elasticity of the flow of public investment for an informal sector firm is three times smaller than its formal counterpart. For the accumulated stock of public capital, this difference increases to a factor of seven. However, the sectoral size distribution of firms matters for the effects associated with public investment: for the formal sector, there is very little variation in the output elasticity of public investment across the size distribution of firms. On the other hand, the output elasticity for informal sector firms is strictly increasing in firm size. Further, the relationship between public investment and capital intensity in production for formal sector firms is negative, especially for firms in the middle of the size distribution. By contrast, the corresponding relationship is strictly positive and increasing with firm size for the informal sector, indicating strong complementarities.

Global Defeminization? Industrial Upgrading and Manufacturing Employment in Developing Countries

ABSTRACTGlobalization has for decades been associated with a rise in the female share of employment or feminization. This study finds that since the mid 1980s, export growth in developing countries is associated with feminization in some countries and a defeminization in others. Focusing on Southeast Asia and Latin America, it uses a fixed-effects econometric model to test whether the technological conditions of production (labor or capital intensity) rather than export growth account for shifts in the female share of employment in manufacturing. It finds that the capital intensity of production, evidenced by shifts in labor productivity, is negatively and significantly related to shifts in the female share of employment in manufacturing, while exports are statistically insignificant. The study concludes that an anti-female bias exists in labor demand changes that result from output or employment shifts in developing countries when manufacturing becomes more capital intensive, a process likely related to industrial upgrading.

Повышение капиталоемкости производства, импортозамещение и экономический рост

Повышение капиталоемкости производства, импортозамещение и экономический рост

Factors of long-term economic growth: Ratio of capital and labor in the increase in the gross income of the economy, number of employed individuals, and labor productivity

This article is a continuation of “Long-Term Growth Factors: Scientific and Technological Progress and Capital Intensity of Production,” published in journal no. 5-2015. It analyzes the ratio of factors of productivity and employment growth in the gross income of the economy. It has also been shown that 63% of GDP growth in current prices in 2001–2011 was due to wages. We have also discussed a number of issues related to economic policy and the situation in the domestic economy and in global markets that affect the growth of the national economy.

The Banks that Said No: Banking Relationships, Credit Supply and Productivity in the United Kingdom

This paper uses a large firm-level data set of UK companies and information on their pre-crisis lending relationships to identify the causal links from changes in credit supply to the real economy following the 2008 financial crisis. Controlling for demand in the product market, we find that the contraction in credit supply reduced labour productivity, wages and the capital intensity of production at the firm level. Firms experiencing adverse credit shocks were also more likely to fail, other things equal. We find that these effects are robust, statistically significant and economically large, but only when instruments based on pre-crisis banking relationships are used. We show that banking relationships were conditionally randomly assigned and were strong predictors of credit supply, such that any bias in our estimates is likely to be small.