Physical Capital Stock Research Articles

Powering economic growth and development in Africa: telecommunication operations

ABSTRACTThis study investigates the effect of telecommunication operations on economic growth and development in selected African countries. The analysis considers a panel of 46 African countries from 2000 to 2015. To measure economic growth, real gross domestic product serves as the proxy, while economic development is measured by the Human Development Index, and telecommunication operations by a composite index of telecommunication computed from mobile line, fixed/CDM line and Internet access penetration via principal component analysis. The physical capital stock is measured by gross fixed capital formation, level of employment by the employment to population ratio, human capital development by enrolment in secondary education for both sexes and technology transfer by net inflows of foreign direct investment in Africa. The empirical results suggest that telecommunication operations promote economic growth and development in Africa. These results imply that for every positive expansion in telecommunication operations and physical capital stock, aggregate output and standard of living will adjust positively in Africa. Thus, an appropriate policy to improve overall investment in Africa and most especially in the telecommunication sector since the spillover effect cut across other sectors and the general economic performance.

Should Capital Flow from Rich to Poor Countries?

Are human and physical capital stocks allocated efficiently across countries? To answer this question, we need to differentiate misallocation from factor intensity differences. We use newly available estimates on factor shares from Monge-Naranjo, Santaeullia-Llopis, and Snchez (2019) to correctly measure the factor shares of physical and human capital for a large number of countries and periods. We find that the global efficiency losses of the misallocation of human capital are much more substantial than those of physical capital, amounting to 40 percent of the world?s output. Moreover, contrary to the findings of Monge-Naranjo, Santaeullia-Llopis, and Snchez (2019) for physical capital, the global misallocation of human capital does not seem to be subsiding. We argue that the proper measure of global misallocation requires considering the potential gains of reallocating both physical and human capital. In this case, the implied efficiency loses from misallocation are up to 60 percent of global output. Attaining those gains, contrary to the prominent Lucas paradox (Lucas, 1990), would often require physical capital to flow from poor to rich countries.

The impact of financial development on economic growth in middle-income countries

Whether an economy can be categorized as middle-income or not is an empirical issue. We apply the World Bank’s standard to divide middle-income economies into trapped middle-income economies and graduated middle-income economies, and compare them with high-income economies. This paper tests how financial system development positively impacts a nation’s economic development among the above-mentioned three groups of economies. We combine models and methodology from previous studies (King and Levine, 1993a; Levine and Zervos, 1998; Rousseau and Wachtel, 2000, 2002; Xu, 2000). Augmenting these models with new measures and relations of financial development, we find that (1) consistent with previous studies, financial development contributes significantly to economic growth through channels of physical capital stock and total factor productivity; (2) there is Granger causality between equity market development and economic growth for all three groups of economies, although some stronger and some weaker; (3) there is a reverse causality between economic growth and equity market development in high-income economies, which is not detected in other economies; (4) strong evidence of Granger causality and feedback between banking system development and inflation is found only in the trapped middle-income economies.

Bubble on Real Estate: The Role of Altruism and Fiscal Policy

In this paper, we are interested in the interplay between real estate bubble, aggregate capital accumulation and taxation in an overlapping generations economy with altruistic households. We consider a three-period overlapping generations model with three key elements: altruism, portfolio choice, and financial market imperfections. Households realise different investment decisions in terms of asset at different periods of life, face a binding borrowing constraint and leave bequests to their children. We show that altruism plays a key role on the existence of a productive real estate bubble, i.e. a bubble in real estate raising physical capital stock and aggregate output. The key mechanism relies on the fact that a real estate bubble raises income of retired households. Because of higher bequests, there children are able to invest more in productive capital. Introducing fiscal policy, we show that raising real estate taxation dampens capital accumulation.

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.

Going Green or Going Away? A Spatial Empirical Examination of the Relationship between Environmental Regulations, Biased Technological Progress, and Green Total Factor Productivity.

China’s economic development has resulted in significant resource consumption and environmental damage. However, technological progress is important for achieving coordinated economic development and environmental protection. Appropriate environmental regulation policies are also important. Although green total factor productivity, environmental regulations, and technological progress vary by location, few studies have been conducted from a spatial perspective. However, spatial spillover effects should be taken into consideration. This study used energy consumption, the sum of physical capital stock and ecological service value as total capital stock, the number of employed people as inputs, sulfur dioxide emissions as undesired outputs, and green GDP as total output to obtain green TFP through a slacks-based measure (SBM) global Malmquist-Luenberger Index. This study also estimated China’s biased technological progress under environmental constraints from 2004 to 2015 based on relevant data (e.g., green GDP, total capital stock, and employment figures). The relationship between green total factor productivity (GTFP), technological progress, and environmental regulation was then examined using a spatial Durbin model. Results were as follows: (1) Based on the complementary elements, although the labor costs gradually increase, the rapid accumulation of capital leads to technological progress that is biased toward capital. However, technological progress in the labor bias can significantly increase GTFP. (2) There is a u-shaped relationship between existing environmental regulations and GTFP. Technological progress can significantly promote GTFP in the surrounding areas through existing environmental regulations. (3) Under spatial weight, the secondary industry coefficient was negative while human capital stock and FDID had positive effects on GTFP. Technological progress is the source of economic growth. It is therefore necessary to promote biased technological development and improve labor-force skills while implementing effective environmental regulation policies.

Relative improvements in road mobility as compared to improvements in road accessibility and urban growth: A panel data analysis

Previous studies revealed that the development of road infrastructure contributed positively to urban growth. However, the demand for and supply of different road types may change according to the level of urbanization, and this might have a significant impact on urban growth. The objectives of this study were twofold. First, to determine the investment level needed for different road types to facilitate urban growth at different levels of urbanization. Second, to understand how the development of different road types promotes export-led urban growth. We apply a fixed-effects panel linear regression analysis on a panel of 60 countries over the period of 1980–2010. The evidence presented in this study suggests that improvements in road mobility promoted export-led urban growth in countries with a low level of urbanization. This implies that policies to facilitate export should be executed in conjunction with high-mobility road network expansion to increase urbanization, especially in countries with a low level of urbanization that commonly suffer from low growth rates and that have a low level of high mobility road networks. Such expansion in road mobility is required to fulfil demands for long-distance travel to transport people from rural to urban areas. In contrast, in countries with a high level of urbanization, more investment is needed to develop roads with high accessibility. Such roads are needed to fulfil daily travel demands as a consequence of urban sprawl and decentralization of employment and populations. Moreover, the evidence shows that per capita education expenditure and physical capital stock per worker contributed to urban growth.

Allocating CO2 allowances to emitters in China: A multi-objective decision approach

China CO2 allowance (CHA) allocation for emitters is one of the pivotal issues to build the effective national carbon market. In this study, we propose a multi-objective decision approach, incorporating the principles of fairness, efficiency, and feasibility, to allocate the CHAs to emitters from the industry perspective. Taking Guangdong, China as an example, we employ the proposed approach for allocating the CHAs to six major industries of petrochemical, chemical, cement, steel, nonferrous metals, and electricity power by 2030. The empirical results show that there are significant conflicts between principles. The proposed approach can not only effectively eliminate the defects of single-object models to make the allocation results more reasonable and acceptable, but also achieve optimal allocation options under various decision preferences. The power industry has the highest CHA and petrochemical industry has the lowest one, and petrochemical, chemical, and steel industries have the greatest potential to reduce carbon intensity. Single-factor sensitivity analysis shows that the CHA/104 Yuan added value (TY) of the industry with lower emissions is more sensitive to the changes of physical capital stock but received fewer impacts from the changes of emissions cap for six industries.

ON THE (NONMONOTONIC) RELATION BETWEEN ECONOMIC GROWTH AND FINANCE

We analyze the simplest possible model of endogenous growth to account for the role of financial development. In our setting, financial development affects productivity and determines the amount of resources subtracted to capital investment. We show that under very general assumptions, the relation between economic growth and financial depth is nonmonotonic, and eventually bell-shaped. We empirically assess our results in a framework that allows to distinguish between long-run and short-run effects. We establish a cointegrating relation and derive the long-run elasticities of per capita gross domestic product (GDP) with respect to employment, the physical capital stock, and financial depth–relying on linear as well as nonlinear models for the finance-growth nexus. We employ the results of the first step estimation to specify an error–correction model and find that there is strong evidence for a nonlinear relationship between financial depth and per capita GDP, consistently with what was predicted by our theoretical model.

The Global Macrofinancial Model

This paper documents the theoretical structure and empirical properties of the latest version of the Global Macrofinancial Model (GFM). This dynamic stochastic general equilibrium model of the world economy, disaggregated into forty national economies, was developed to support multilaterally consistent macrofinancial policy, risk and spillover analysis. It features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. These macrofinancial linkages encompass bank and capital market based financial intermediation, with financial accelerator mechanisms linked to the values of the housing and physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis, macroprudential policy analysis, spillover analysis, and forecasting applications of the GFM are demonstrated. These include quantifying the monetary, fiscal and macroprudential policy transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.

The Impact of World War II on the Growth of U.S. Potential Output

Claims that the experience of economic mobilization between 1942 and 1945 laid the supply foundations for output and productivity growth in the United States after the war have formed the basis of the conventional wisdom for decades. In fact, between 1941 and 1948, total factor productivity within manufacturing declined, and fell even more sharply during the war. The war forced a radical shift towards goods in which the manufacturing sector had little experience, where initial productivity levels were low. The learning that took place in the mass production of ships, aircraft, and other munitions had little relevance for the postwar period because the wartime output mix and implicit factor prices were unique to that period. Considering together the effects on TFP, the labor force, and the physical capital stock, the longer term impact of mobilization on the level and trajectory of US potential output was, on balance, almost certainly negative.

Some considerations on China’s long-run economic growth: 1952–2015 from the analysis of factor contributions to that of the profit rate

This article offers methodological reflexions on China’s long-term economic growth. We first construct time series of physical capital stocks going from 1952, close to the date of formation of the People’s Republic, until 2015, by taking into account the latest yearbooks (I). Then, we test this new database to estimate the contributions of the production factors to GDP growth within the framework of various neoclassical models, highlighting the limitations of the latter (II). After that, an original framework is mobilized, in the spirit of the recent researches provided by Thomas Piketty, who combines mainstream references with components borrowing from Keynesian as well as neoinstitutionalist formalisations. Here, several problems associated with such researches are identified (III). Finally, we move the discussion towards a more promising approach, involving profit rate indicators, to deepen future studies of China’s long-run economic growth (IV).

Factor accumulation and economic growth in Pakistan: incorporating human capital

PurposeThe purpose of this paper is to examine the long-run and short-run relationship between factor accumulation (i.e. physical capital and human capital) and economic growth by calculating the stocks of human capital and real physical capital.Design/methodology/approachThe study uses endogenous growth model, where GDP per worker is the dependent variable and factor accumulation (real physical capital per worker and human capital) is the explanatory variable under the autoregressive distributive lag framework from 1973 to 2014 for Pakistan.FindingsThe results suggest that there is a long-run relationship between factor accumulation and GDP per worker in Pakistan. Findings of the study are consistent with the endogenous growth model suggesting that accumulation of human capital increases labor productivity, employment level and per capita income, and causes economic growth.Practical implicationsDeveloping countries like Pakistan should increase share of human capital for economic development. Government should invest in the education sector because investment in human capital has a large potential of productivity growth and welfare increase in developing countries.Originality/valueThis study challenges the notion of human capital and real physical capital stock used by different researchers. Considering human capital as a core factor of production, a series of human capital as average year of schooling is calculated by utilizing the perpetual inventory method.

The Global Macrofinancial Model

This paper documents the theoretical structure and empirical properties of the latest version of the Global Macrofinancial Model (GFM). This dynamic stochastic general equilibrium model of the world economy, disaggregated into forty national economies, was developed to support multilaterally consistent macrofinancial policy, risk and spillover analysis. It features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. These macrofinancial linkages encompass bank and capital market based financial intermediation, with financial accelerator mechanisms linked to the values of the housing and physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis, macroprudential policy analysis, spillover analysis, and forecasting applications of the GFM are demonstrated. These include quantifying the monetary, fiscal and macroprudential policy transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.

The Global Macrofinancial Model

This paper documents the theoretical structure and empirical properties of the latestversion of the Global Macrofinancial Model (GFM). This dynamic stochastic generalequilibrium model of the world economy, disaggregated into forty national economies,was developed to support multilaterally consistent macrofinancial policy, risk andspillover analysis. It features a range of nominal and real rigidities, extensivemacrofinancial linkages, and diverse spillover transmission channels. Thesemacrofinancial linkages encompass bank and capital market based financialintermediation, with financial accelerator mechanisms linked to the values of the housingand physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis,macroprudential policy analysis, spillover analysis, and forecasting applications of theGFM are demonstrated. These include quantifying the monetary, fiscal andmacroprudential policy transmission mechanisms, accounting for business cyclefluctuations, and generating relatively accurate forecasts of inflation and output growth.

Recent trends in the productivity of the Italian trawl fishery: The importance of the socio-economic context and overexploitation

The aim of this paper is to highlight the productivity of Italian trawl fishery, one of the most important sector in the Italian fishing fleet. As shown in this study, three variables play a significant effect on Total Factor Productivity (TFP) in a given year: the actual number of fishing days, the average market prices of commercial species and the stock of physical capital. While the number of fishing days can have a negative impact on the TFP, a positive correlation occurs instead with the other two variables. It is also possible to observe a high variability in TFP among different regions of Italy, a finding that is to be expected given the dual nature of the Italian economy, characterized by a high level of discrepancy in prosperity between the North and the South. This lends support to the hypothesis that significant positive externalities may occur in a more dynamic business environment, one which is both open to innovation and increased international and social relations.

What Determines Export Performances in High‑tech Industries

AbstractThe paper aims to identify the determinants of exports in high-technology sectors (high-tech, HT) of Visegrad countries (the Visegrad four, V4: Poland, the Czech Republic, Slovakia and Hungary) and the core member states of the European Union (EU). Based on the augmented gravity model, we estimate the regressions on panel data of the bilateral export flows of the EU-15 and V4 with the rest of the world in 1999−2011, by employing the Poisson pseudo-maximum-likelihood (PPML) estimator. The comparison of the estimations of overall export flows with the estimates explicitly done for the high-tech sectors allows us to outline the main characteristics of the existing gap in high-tech export performances of the EU-15 and V4. Estimation results find that while for the EU-15, human capital accumulation is statistically significant and export flows increase with similarity in physical capital accumulation of the trade partner; for V4, instead of similarity, the difference in physical capital stock increases exports and human capital accumulation does not yield statistically significant effects.

A Note on Optimal Income Redistribution in a Creative Region

We study optimal income redistribution in a region that is creative in the sense of Richard Florida and thereby extend aspects of the recent analysis in Batabyal and Beladi (2017). Using the terminology of these researchers, members of the creative class are either artists or engineers. This bipartite grouping stems from the manner in which creative capital is acquired by the artists and the engineers. Specifically, we show that when the savings rates of the artists and the engineers comprising the creative class satisfy a particular inequality, it is possible for a regional authority (RA) to uniquely redistribute income between these two groups in a way that achieves the so called “golden rule” stock of physical capital.

Effect of Expenditures on Education, Human Capital Development and Economic Growth in Nigeria

<p>Earlier studies on economic growth asserts that economic prosperity and functioning of a nation depends on its physical and human capital stock in form of knowledge acquired and an agent of national development in all countries of the world. Therefore, the need to examine the effect of expenditures on education, human capital development on economic growth in Nigeria. This study focuses on public expenditures on the education with a view to ascertain the relative commitments of the governments to this sector.</p><p> </p><p>This study covers the period of 1970-2015, employing an ex-post facto research design using time series data. The data used for this study are obtained mainly from secondary data which is quantitative in nature. The study employs descriptive statistics to assess the contributions of government expenditure on education, government expenditure on health, tertiary school enrolment, secondary school enrollment, primary school enrolment on gross domestic product. Also, Unit Root Test is conducted on the series to ascertain if they are stationary while co-integration test follows suit, to also ascertain the long run relationship between expenditure on education and human capital development on economic growth. The Johansen Cointegration test and Error Correction Mechanism estimated model found that that there is no significant effect of expenditure on education and human capital development on economic growth in Nigeria.</p><p> </p>

The Impact of Social Justice on Economic Performance

A large body of literature shows that institutions positively impacts economic performance. This study proposes that social justice which is an essential virtue of institutions also positively influences economic performance. We build the case that social justice affects capital, human capital and technology accumulation. This in turn positively drives economic performance. The hypothesis is empirically supported with a cross-sectional analysis of OECD countries and panel data analysis of EU countries. The results are robust under Instrument Variable (IV) analysis and numerous controls. The examination also determines that social justice contributes significantly to the traditional neoclassical model that relates output to the stock of human and physical capital. Consequently, the results imply that if a country such as Turkey is able to raise its rating to the level of Nordic countries (e.g. Norway), GDP per capita may increase from 10,000 USD to 56,000 USD.