Knowledge Capital Accumulation Research Articles

Household debt, knowledge capital accumulation, and macrodynamic performance

Motivated to some extent by the empirical significance of student loans in the U.S., this paper incorporates knowledge capital formation by working households financed through debt to a demand-led dynamic model of physical and knowledge capital utilization and output growth. Average labor productivity varies positively with the average knowledge capital across the labor force. A rise in labor productivity resulting from knowledge capital accumulation is fully passed on to the real wage so that the wage share remains constant. In the unique long-run equilibrium, which is stable, an exogenous rise in the wage share raises the rates of physical capital utilization and output growth but has an ambiguous effect on the rate of employment (which also measures the rate of knowledge capital utilization). The long-run equilibrium also features the following interrelated results: the output growth rate is greater than the exogenous interest rate; the debt ratio (working households’ debt as a ratio of either the physical or the knowledge capital, or the output) is independent of the interest rate; and the allocation of a higher (lower) proportion of wage income to debt repayment (consumption) raises instead of lowers the debt ratio, which we dub the paradox of debt repayment.

Debt market friction, firm-specific knowledge capital accumulation and macroeconomic implications

This paper studies research and development (R&D) investment and accumulation of firm-specific knowledge capital (i.e., human capital) in the presence of debt market frictions, highlighting the macroeconomic implications. Empirically, R&D investment and knowledge capital are negatively correlated with debt at the firm level, which is in contrast with the positive relationship between physical investment and firm debt. I propose a new model to account for these facts: Firms accumulate firm-specific knowledge capital through R&D investment. However, knowledge capital – different from physical capital – cannot be used as banking collateral. Firms with high R&D investment opportunities rely more on internal finance and less on external debt. The model is quantitatively consistent with empirical facts along several dimensions. Based on the model, I then study the implications of two industrial policies. A practice that encourages using intellectual property as collateral for bank loans has a relatively small effect. I recommend a policy of tax credits for R&D investment. In fact, this policy can increase output by more than 5% and welfare by more than 3% in the long run.

Innovativeness along the Business Cycle: The Case of Uruguay

ABSTRACTThis article analyzes the dynamics of knowledge-capital accumulation along the different stages of the business cycle within the benchmark proposed by Crépon, Duguet, and Mairesse (1998) using a balanced panel of Uruguayan firms. Findings reveal that the intensity of innovation evolves procyclically, while the propensity of innovation and the degree of novelty embedded in innovations follow a countercyclical path. They also show that product innovations during economic recessions are only pursued by companies that are able to divert their sales to world markets; otherwise, they tend to innovate in processes. Results further suggest that productivity gains driven by knowledge-capital accumulation are magnified by systematically engaging in innovation activities.

Public policy and growth in Canada: An applied endogenous growth model with human and knowledge capital accumulation

Evidence suggests that the Canadian economy is over-shadowed with lagging productivity growth and that its innovation strategy lacks a market-oriented focus; and is unbalanced and biased. We study this problem with the aid of a dynamic general equilibrium model driven by analytics of endogenous growth and investigate the viable policy options and assess the interactions between knowledge driven growth, acquisition of human capital, and the role of strategic public policy for the Canadian economy. We study alternative public policies aimed at fostering the development of human capital (investment in education) and those at enhancing investments in innovation. Based on the re-allocation effects triggered by public subsidization policies on higher education versus industry/business R&D, our results corroborate that Canadian economy is falling short of its potential in (business) technological innovation. Our analyses further imply that the most welfare enhancing policy is to have a complementary mix of education and R&D subsidization designed to avoid the trade-offs that emerge in the short run.

An applied endogenous growth model with human and knowledge capital accumulation for the Turkish economy

We analytically investigate and assess the interactions between knowledge-driven growth, acquisition of human capital, and the role of strategic public policy for the Turkish economy within the context of a general equilibrium model. The model aims to investigate the public policies toward fostering the development of human capital (such as investments in education and learning) and those at enhancing total factor productivity through investments in physical capital and innovation (such as subsidies to R&D), and to study the impact of various public policies on patterns of growth, along with their likely consequences from the points of view of capital accumulation, income distribution, social welfare and economic efficiency for the Turkish economy. With the aid of the model, we seek for analytical answers to the following question: for a government constrained with its budgetary requirements, which type of public subsidiziation policies is more conducive for enhancing growth and social welfare: promotion of human capital formation through subsidies to education expenditures, or promotion of new R&D formation through subsidies to R&D investment expenditures? According to the model findings, a single-handed strategy of only subsidizing education expenditures to promote human capital formation falls short of achieving desirable growth performance in the medium to long run. Under the policy of human capital formation promotion, expected growth and welfare results are weak in the medium-to-long run unless increased human capital can upgrade the number of research personnel employed in the R&D development sector. Under these observations, it can be argued that the public policy should be directed to R&D promotion in the medium-to-long run to complement an education promotion program to sustain human capital formation.

Debt Market Friction, Firm's Knowledge Capital Accumulation and Macroeconomic Implications

This paper studies RD and firm-specific knowledge capital is very difficult to be used as collateral in the debt market while only some fraction of physical capital can. The model is calibrated and validated using detailed firm level data and other independent data sets, and is quantitatively successful along a wide variety of dimensions. Based on the quantitative model, I then study the implications of two industrial policies related to R&D investment. I do not recommend a policy which encourages using intellectual property as collateral for bank loans, but recommend the policy of a tax credit for R&D investment. In fact, the tax credit policy can increase output by more than 3% in the long run.

Sustainability and substitutability.

Developing a quantitative science of sustainability requires bridging mathematical concepts from fields contributing to sustainability science. The concept of substitutability is central to sustainability but is defined differently by different fields. Specifically, economics tends to define substitutability as a marginal concept while fields such as ecology tend to focus on limiting behaviors. We explain how to reconcile these different views. We develop a model where investments can be made in knowledge to increase the elasticity of substitution. We explore the set of sustainable and optimal trajectories for natural capital extraction and built and knowledge capital accumulation. Investments in substitutability through knowledge stock accumulation affect the value of natural capital. Results suggest that investing in the knowledge stock, which can enhance substitutability, is critical to desirable sustainable outcomes. This result is robust even when natural capital is not managed optimally. This leads us to conclude that investments in the knowledge stock are of first order importance for sustainability.

Stratégies anti-contrefaçon des entreprises cosmétiques de luxe : accumulation versus valorisation du capital-savoir

Dans les cosmetiques de luxe, la contrefacon est prejudiciable aux entreprises, affectees en termes d’image et de profitabilite. Lutter contre elle est donc un enjeu economique important. Dans cet article, nous etudions l’efficacite de l’innovation technologique comme strategie anti-contrefacon. L’objectif est de determiner dans quelle mesure l’accumulation du capital-savoir permet aux entreprises cosmetiques de faire face a la contrefacon et a ses impacts negatifs. Appuyant notre recherche par des exemples de marques leaders, telles que Dior, Chanel ou Yves Saint Laurent, nous demontrons que l’accumulation du capital-savoir est largement employee comme strategie anti-contrefacon, en parallele aux strategies de valorisation du capital-savoir existant.Codes JEL : L20, L66, O32, O34

Spatial diversity in invention: evidence from the early R&D labs

This article uses historical data on inventor and firm research and development (R&D) lab locations to examine the technological and geographic structure of corporate knowledge capital accumulation during a formative period in the organization of United States innovation. Despite the localization of inventive activity around the labs, one-quarter of inventors lived outside a 30mile commuting radius of the nearest facility of the firm they assigned their patents to. A strong positive effect of distance from a lab on technological importance is identified, especially for inventors from large cities that were geographically separated from a firm’s labs. A patent case–control method helps explain spatial sourcing by showing that the average quality of externally available inventions was high. Firms selected complementary, not substitute, inventions from non-lab urban locations, suggesting a link between the organization and the geography of innovation.

Are public and private outlays for physical and knowledge capital accumulation equally productive?

This paper aims at obtaining empirically tentative answers to at least two questions of importance in the macroeconomic literature: (1) to what degree are private and public investment in physical and knowledge capital productive and what is their role in longer-term movements in aggregate productivity growth? and (2) does increasing the number of capital components in neoclassical growth regressions drive the share of ‘broad’ capital up to one as suggested by new growth theory? We will therefore rely on specifications derived from a generalized neoclassical growth model, which are in fact very well reconcilable with the equilibrium approach in the public economics literature.