Capital Stock Growth Research Articles

The Tax Cuts and Jobs Act (TCJA) : A Quantitative Evaluation of Key Provisions

The Tax Cuts and Jobs Act (TCJA) significantly altered how business income is taxed in the US. This paper provides a quantitative assessment of the distributional and macroeconomic effects of the TCJA, both in the short run and in the long run, using a life-cycle model with occupational choice and accumulation of entrepreneurial human capital. When salient provisions of the TCJA are implemented, the economy will experience an increase of 0.20 and 0.5 percentage points in annual GDP and capital stock growth for the first decade 2018-2027, respectively. However, economic inequality increases across and within occupations under the TCJA. The provisions affect the incentives for individuals to save, making the occupational choice extensive margin critically important in analyzing the potential impacts of the new tax reform.

Firm Financing and the Relative Demand for Labor and Capital

During both the 2008 and the COVID crises, aggregate employment in Europe and the US fell despite continuing growth in the aggregate capital stock. Using more than one million firm-year observations of small and medium European firms between 2003 and 2018, this paper introduces new stylized facts on how firms’ relative demand for labor and capital evolved as their capital structure adjusted to the events of the 2008 crisis. It also provides the first micro-level evidence that firms substitute capital for labor when financing costs rise. The empirical evidence lends support to the hypothesis that substitution is driven by an incentive to raise holdings of collateralizable capital. The analysis uses the heterogeneous effects of ECB monetary policy surprises across the firm distribution to identify exogenous firm-level external financing shocks. The results suggest that maintaining a well functioning credit market supports a higher labor share of economic growth.

A biophysical model of the industrial revolution

Several biophysical characteristics underlay Britain's Industrial Revolution: improvements in agricultural productivity, large increases in use of coal‐energy supply, and physical construction of infrastructure for industrialization and urbanization. These characteristics are represented in a four‐sector model of Britain's economy (1760 to 1913) including agriculture, mining, construction of capital, and the production of goods and services. The model has a novel mathematical representation of a dynamic general equilibrium between capital, labor, and energy in an economy. Historical data are used to calibrate the model for growth of Britain's capital stock, coal use, and employment during the Industrial Revolution (first and second periods). Model simulations explore the impacts of two biophysical constraints: stagnation in agricultural productivity and reduced efficiency in coal mining in the absence of steam engines. Both scenarios exhibit substantial reductions in the growth of capital stock and significant changes to the distribution of labor. This article met the requirements for a gold‐gold JIE data openness badge described at http://jie.click/badges.

Projected material requirements for the global electricity infrastructure – generation, transmission and storage

We analyse how the global material stocks and flows related to the electricity sector may develop towards 2050. We focus on three electricity sub-systems, being generation, transmission and storage and present a model covering both bulk and critical materials such as steel, aluminium and neodymium. Results are based on the second Shared Socio-Economic Pathway scenario, with additional climate policy assumptions based on the IMAGE integrated assessment framework, in combination with dynamic stock modelling and an elaborate review of material intensities.Results show a rapid growth in the demand for most materials in the electricity sector, as a consequence of increased electricity demand and a shift towards renewable electricity technologies, which have higher material intensities and drive the expansion of transmission infrastructure and electricity storage capacity. Under climate policy assumptions, the annual demand for most materials is expected to grow further towards 2050. For neodymium, the annual demand grows by a factor 4.4. Global demand for steel and aluminium in the electricity sector grows by a factor 2 in the baseline or 2.6 in the 2-degree climate policy scenario.We show that the combination of rapid growth of capital stocks and long lifetimes of technologies leads to a mismatch between annual demand and the availability of secondary materials within the electricity sector. This may limit the sector to accomplish circular material flows, especially under climate policy assumptions. We also highlight the potential for electric vehicles to curb some of the material demand related to electricity storage through adoption of vehicle-to-grid services.

THE IMPACT OF RENEWABLE ENERGY CONSUMPTION ON THE ECONOMIC GROWTH OF THE ASEAN COUNTRIES

The foremost purpose of the study is to explore the impact of renewable energy consumption (REC) on the economic growth of ASEAN countries. Data were extracted from the World Bank and ASEAN Energy Information Administration (EIA). The “Generalized Method of Moments (GMM)” approach has been used by using the STATA software for the analysis. The results unprotected that the REC and non-renewable energy consumption (NREC), growth in labor force and capital stock has positive nexus with the economy growth of the ASEAN countries. These findings provide the guidelines to the regulators that they should make the policies for the REC and NREC that increase the economy growth of the world.Keywords: Economy Growth, Renewable Energy, Non-renewable Energy, Growth of Capital, Growth of Labor Force, ASEAN countriesJEL Classifications: Q1, N7DOI: https://doi.org/10.32479/ijeep.10589

The Impact of Energy Consumption and Economic Growth on Carbon Dioxide Emissions

This study explored the effect of energy consumption and economic growth on CO2 emissions. The relationship between energy consumption, economic growth and CO2 emissions was assessed using regression analysis (the pooled OLS regression and fixed effects methods), Granger causality and panel cointegration tests. Data from 70 countries between 1994–2013 were analysed. The result of the Granger causality tests revealed that the study variables (population, capital stock and economic growth) have a bi-directional causal relationship with CO2 emissions, while energy consumption has a uni-directional relationship. Likewise, the outcome of the cointegration tests established that a long-run relationship exists among the study variables (energy consumption and economic growth) with CO2 emissions. However, the pooled OLS and fixed methods both showed that energy consumption and economic growth have a significant positive impact on CO2 emissions. Hence, this study supports the need for a global transition to a low carbon economy primarily through climate finance, which refers to local, national, or transnational financing, that may be drawn from public, private and alternative sources of financing. This will help foster large-scale investments in clean energy, that are required to significantly reduce CO2 emissions.

Trend and Growth of Capital Stock in Bihar During 1980-2017

Trend and Growth of Capital Stock in Bihar During 1980-2017

The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from the ARDL Bound Testing Approach

Public debt is intended to bridge the gap between domestic savings and investment. This paper examines the effect of public debt on economic growth in Bangladesh in the short run and the long run. It finds a significant positive relationship to exist between public debt and economic growth in the short-run while a significant rise in the public debt in Bangladesh appears to be a burden for the economic growth in the long run controlling for other determinants of growth. This suggests that funds have not been utilized in the productive economic avenues which might have improved the economic growth scenario in Bangladesh. Also, the adverse effect exerted by public debt may further be responsible for a reduction in investment and slower growth of capital stock, which eventually can hamper labour productivity growth in the country in the long run.

Social Investment Policy, Economic Growth, and Welfare States: Channels of Pro-Growth Effects of Policy

AbstractSocial investment (SI) policies have been popular among industrial countries in the past two decades. Governments hope that SI policies will promote productivity and economic growth by creating high-skill labor forces that can adapt to the imperatives of the new knowledge economy and technological advances, or that can create new technologies themselves. They also hope that SI policies will mitigate new social risks, such as single-parent families and workers in precarious employment by better preparing workers for jobs and promoting social inclusion. However, little research exists that empirically investigates whether or not SI policies really produce these positive outcomes. Of all economic outcomes, this paper focuses on economic growth and the channels of economic growth—multifactor productivity (MFP), physical capital investment, and labor input—and investigates whether SI policies promote growth in GDP and its channels. Data from 17 industrial countries are analyzed. The analysis finds that family support, education, and ALMP spending (all measured as spending per child, student, and an unemployed person, respectively) is positively associated with MFP and GDP growth, and that MFP growth is the main channel through which SI policies enhance GDP growth. Education spending boosts the growth of all of MFP, physical capital stock, labor input, and GDP growth via those channels. While family support does not promote the growth of labor input, the results suggest that larger family support spending leads to higher levels of labor input. Overall, these types of SI spending have generally positive effects on economic growth.

Does globalization matter for environmental sustainability? Empirical investigation for Turkey by Markov regime switching models

Many efforts have been made to theoretically explain and/or empirically investigate how globalization plays a role on environmental quality. However, as in theoretical explanations, empirical literature as well has not reached a consensus yet to enlighten possible effects in developing countries especially. On the one hand, Globalization is expected to contribute to decrease environmental degradation through the technique effect that underlines the role of obtaining clean technologies. On the other hand, this expectation may become reversed since globalization triggers economic activities through the scale effect and movements of dirty industries to developing countries. This paper focuses on how environmental sustainability reacts to globalization in Turkey. To this end, ecological footprint as a proxy for environmental sustainability and KOF globalization measurements are analyzed by using Markov regime switching models. Estimations indicate that growth in financial globalization, politic globalization, trade globalization, human capital, and capital stock reduce the ecological footprint growth of Turkey. Results reveal as well that interpersonal globalization growth diminishes ecological footprint growth. All three regime-switching models yield that growths of economic globalization and social globalization result in an increase in ecological footprint growth in Turkey.

The relationship between public capital stock, private capital stock and economic growth in the Latin American and Caribbean countries

In this study, we analysed the relationship between public capital stock, private capital stock and economic growth for a group of 30 Latin American and Caribbean countries from 1970 to 2014. To achieve our goals, the panel vector autoregression methodology, panel dynamic ordinary least squares and panel fully modified ordinary least squares estimators were used. The results from our estimations point to both public and private capital having a positive effect on the long-run economic growth of the countries in our sample. However, the results also point to public capital seeming to crowd private capital in the short run, which could consequently be one of the explanations for the adverse effect that public capital stock seems to have on growth. (A result which was also found in the short-run analysis.) These findings suggest that governments in Latin America and the Caribbean should continue to support public and private investment projects, given the positive effect that both types of capital seem to have on the long-run economic growth of these countries. However, some changes should be made in the planning and execution of such investments in order to avoid some undesirable effects that seem to exist, especially in the short run.

An Empirical Investigation of the Causal Relationship amongst Energy Consumption, Net Fixed Capital Stock and Economic Growth in India

Purpose- in this paper, an effort has been made to establish the causal relationship amongst energy consumption, net fixed capital stocks and economic growth measured in terms of Gross Domestic Product (GDP) in India. Further attempt has been made to fix the direction of causality by taking into account the disaggregated energy consumption such as petroleum, coal, electricity and gas consumption.
 Design/ methodology/ approach- the methodology is based on the Engle-Granger method of co-integration and Johanson-Juselius multivariate method and uses a time series data of disaggregated energy consumption, net fixed capital stocks and GDP over the period 1970-2002. Since no co-integration was found amongst the concerned variables, Standard Granger method is used to find out the causality between energy consumption and economic growth as well as energy consumption and net fixed capital stocks.
 Findings- the empirical results infer that there is bi-directional causality between energy consumption and economic growth and unidirectional causality running from energy consumption to net fixed capital stocks. The research concluded that since India is a net energy importer, especially petroleum, it has to pay a high oil import bill every year. Therefore, using oil more efficiently and/or substituting petroleum and gas by coal and electricity wherever possible could be a good policy measure. Perhaps, an energy conservation policy regarding petroleum and natural gas consumption would not lead to any adverse side effects on economic growth in India.

Sustained investment surges

AbstractExisting empirical studies have mainly focused on determinants of average investment levels. Instead, we investigate episodes of accelerated capital stock growth having a duration of eight years or longer. We find that episodes are relatively common, even in low-growth regions, but more so in middle-income and Asian countries. After identifying 175 episodes between 1950 and 2014, we employ probit analysis to explore their characteristics. Turning points in investment tend to be preceded by macroeconomic stability, real exchange rate undervaluation, and net capital outflows (especially portfolio outflows). We also find a negative correlation with the capital to output ratio and per capita GDP, and a positive correlation with a human capital index. Investment surges tend to be associated with changes in the trade balance and, to a (statistically) weaker extent, with structural change.

Firm Financing and the Relative Demand for Labor and Capital

During both the 2008 and the COVID crises, aggregate employment in Europe and the US fell despite continuing growth in the aggregate capital stock. Using more than one million firm-year observations of small and medium European firms between 2003 and 2018, this paper introduces new stylized facts on how firms’ relative demand for labor and capital evolved as their capital structure adjusted to the events of the 2008 crisis. It also provides the first micro-level evidence that firms substitute capital for labor when financing costs rise. The empirical evidence lends support to the hypothesis that substitution is driven by an incentive to raise holdings of collateralizable capital. The analysis uses the heterogeneous effects of ECB monetary policy surprises across the firm distribution to identify exogenous firm-level external financing shocks. The results suggest that maintaining a well functioning credit market supports a higher labor share of economic growth.

Terrorism and its Determinants: Panel Data Evidence from 94 Countries

In recent years, the world is plagued by terrorism which has slowed down economic growth and development across countries. This paper focuses on the terrorism affected countries to determine what actually causes terrorism. The paper utilized a comprehensive sample of 94 countries from 2005 to 2016 and employed suitable econometric techniques to estimate the specified models. The results revealed that low per capita income and political instability are the main driving forces behind prevalent terrorism. Similarly, the growths of both physical as well as human capital have reduced terrorism whilst inflation and government consumption have positively influenced terrorism. The role of military expenditures is observed to be dual as it impacted terrorism negatively in Muslim countries and positively in non-Muslim countries. Decreased corruption is found to be insignificant for the sample as whole but appeared to be having a negative impact on terrorism when the sample is divided between Muslim and non-Muslim countries. The robustness exercise has also revealed similar findings. Lastly, we found bidirectional causality between political instability and terrorism, political instability and corruption, government consumption and inflation and the growth of GDP per capita and the growth of physical capital stock. The paper suggests that countries where terrorism is on the rise shall focus on increasing income of the population, education, capital stock along with ensuring political stability to eradicate the problem of terrorism.

Cognitive skills and economic performance: evidence from the recent international student assessment tests

This paper examines the empirical relationship between the quality of educational attainment and economic growth. It uses country scores from the recent international student assessment tests as a proxy for education quality and cognitive skills of the labor force along with data on education quantity (schooling) and several control variables. The student assessment data set includes two widely used international tests, PISA and TIMSS, spanning the periods 2000–2015, and 1995–2015, respectively. Empirical results from OLS and IV estimations indicate that cognitive skills component of human capital has a robust positive effect on growth performance whereas the impact of average years of schooling, after conditioning on test scores, is statistically insignificant. Results suggest that to improve the quality of human capital stock and spur economic growth, countries should focus more on developing national education policies designed to enhance students’ cognitive skills rather than merely increasing the number of schools.

Business investment in EU countries

The article analyses recent developments in business investment for a large group of EU countries, using a broad set of analytical tools and data sources. We find that the assessment of whether or not investment is currently low varies across benchmarks and countries. At the euro area level and for most countries, the level of business investment is broadly in line with the level of overall activity. However rates of capital stock growth have slowed down since the crisis. The main cyclical determinants of investment developments in the euro area include foreign and domestic demand, uncertainty and financial conditions. Uncertainty seems to have played a negative role during the financial and sovereign debt crises; however, given its low levels more recently, it has not acted as a drag on business investment overall during the recovery. Credit constraints appear to have hindered investment during the twin crises, especially in stressed countries. Aside from cyclical developments, important secular factors – relating to demographics, the changing nature and location of production, and the business environment – have influenced investment. Another factor that may have amplified the decline in private investment, particularly in countries that were hit hardest by the sovereign debt crisis, is the low level of public investment. This is because when public investment enhances the productivity of the private sector, there may be positive spillovers from the former to the latter, including across countries. Finally, intra-sector capital misallocation, measured as the within-sector dispersion across firms in the marginal revenue product of capital, has been increasing in Europe since 2002, which may in turn have exerted a significant drag on total factor productivity dynamics, and hence on aggregate output growth. JEL Classification: E32, E52, E62, D24, D61

The contribution of public capital towards economic growth: A KwaZulu-Natal case study

Background: The adequate supply of infrastructure is essential to ensure increasing productivity and economic growth. Research found this relationship to be significantly positive. The external effects that spending on public capital has on the production function of private firms stimulates economic growth overall. This implies that public capital inputs should be incorporated into the production function.Aim: The way provincial or regional growth depends on infrastructure is investigated in this article and it is applied to data from KwaZulu-Natal province, as an illustration.Setting: This study investigates the extent to which infrastructure in KwaZulu-Natal province in South Africa leads towards economic growth of the province.Methods: From a theoretical framework, this article develops an endogenous growth model, which investigates the association between provincial public capital stock expenditure and economic growth. Data series for public capital formation are first developed to apply in this study and others to follow. Econometric techniques are then employed, using quarterly data between 2001 and 2015, to assess the set hypothesis that growth in expenditure on public capital leads to national economic growth.Results: The empirical results support the argument of a positive relationship between provincial capital stock and economic growth in the long-term. The findings also suggests that the long-term causality or effect fades over time, albeit slowly.Conclusion: The nature and statistical significance of the long-term equilibrium relationship seems to be ambiguous at best. Some evidence of an equilibrium relationship in the short-term was, however, also observed. In conclusion, there also seems to be some causality between provincial capital stock and provincial gross domestic product in the short-run.

The Relationship between Human Capital and Economic Growth in Ireland

This paper examined the causal relationship between human capital, capital stock, output and economic growth in Ireland in the period 1980-2012. This is the first test of causality between the factors in this time period for Ireland, and cointegration and error-correction modelling was used to test the relationships. Results show that GDP, capital stock and human capital are cointegrated. There is evidence of bi-directional causality from GDP to capital stock, bi-directional causality from capital stock to human capital, and uni-directional causality from GDP to human capital, but not vice versa. The human capital-led hypothesis, that GDP is caused by human capital, is not supported.

Remittances and Economic Growth

Economic growth has become an important study growth matter. By economists economic growth is defined as capital stock growth, rising per capita GDP, increased access for manufactured goods and services for consumption and so on. In economic growth affect several factors and policies. Corruption, lack of investment, inappropriate institutions, inappropriate education etc. are some of obstacles to economic development. Consumption and investment are important components of aggregate demand with multiplicative effect in development. Remittances of migrants are significant potential financial capital used for investments, reflected in economic development and social prosperity. Remittances in Kosovo since 1960 have always been increasing. Participation of remittances to GDP in Kosovo in 2010 is about 12%. Remittances are the highest contributor to the Kosovo trade deficit coverage and are higher than foreign direct investments. Remittances unfortunately for various reasons are not exploited and are not sufficiently exploited for economic development.