Physical Capital Adjustment within Spain: Long-Run and Short-Run Analysis

Purpose An aggregate production function has been used in macroeconomic analysis for a long time, even though it seems that it is conceptually confusing and problematic. The purpose of this paper is to argue that the measurement problem related to the heterogenous capital input that exists in macroeconomics is also relevant to microeconomic market situations. Design/methodology/approach The author constructed a microeconomic market model to address both the problems of the measurement of the physical capital and of substitutability between labor and capital in the short run using two types of technologies: labor neutral and labor reducing. The author proposed that labor and physical capital inputs are complementary in the short run and can become substitutes only in the long run when the technology advances. Findings The author found that even if the technology improves at a fast rate over time, there are then diminishing returns of profits to technology and an upper limit to profits. Moreover, the author showed that under the labor-reducing technology, labor class earns more initially as technology improves, but their incomes start declining after some threshold level of passage of time. Originality/value The author cautioned the applied researcher that the estimated labor and capital coefficients of generalized Cobb–Douglas and constant elasticity of substitution of types of production functions could not be interpreted as partial elasticities of labor and capital if in reality the data come from fixed-proportions types of processes.

Download Full-text

FDI Asymmetries in Emerging Economies: The Case of Colombia

International Journal of Economics and Finance ◽

10.5539/ijef.v11n8p35 ◽

2019 ◽

Vol 11 (8) ◽

pp. 35

Author(s):

Jose U. Mora ◽

Celso J. Costa Junior

Keyword(s):

Emerging Economies ◽

Adjustment Costs ◽

Nominal Wage ◽

Real Output ◽

Empirical Results ◽

Capital Adjustment ◽

Long Run ◽

Price Rigidities ◽

Short Run ◽

Distribution Of Income

We build a DSGE model to study the asymmetries of FDI shocks in an economy like Colombia. Besides nominal wage and price rigidities, we use the fact that Colombia has two productive and differentiated regions, Bogota that produces more than 25% of Colombia GDP (DANE, 2016) and the rest of the country, Ricardian and non-Ricardian agents, habit formation, capital adjustment costs, and modeled an entire foreign sector. Empirical results show that even when in the long run results are not very different in terms of real output, the short run effects are asymmetric implying that a shock to FDI in the rest of the country might cause important microeconomic adjustments that could improve the distribution of income throughout the country.

Download Full-text

Does female human capital contribute to economic growth in India?: an empirical investigation

International Journal of Social Economics ◽

10.1108/ijse-10-2015-0272 ◽

2017 ◽

Vol 44 (11) ◽

pp. 1506-1521 ◽

Cited By ~ 3

Author(s):

Madhu Sehrawat ◽

A.K. Giri

Keyword(s):

Economic Growth ◽

Human Capital ◽

Physical Capital ◽

Variance Decomposition ◽

Content Type ◽

Indian Economy ◽

Education And Health ◽

Long Run ◽

Short Run ◽

The Impact

Purpose The purpose of this paper is to examine the impact of female human capital on economic growth in the Indian economy during 1970-2014. Design/methodology/approach The paper employs Ng-Perron unit root test to check the order of integration of the variables. The study also used ARDL-bounds testing approach and the unrestricted error-correction model to investigate co-integration in the long run and short run; Granger’s causality test to investigate the direction of the causality; and variance decomposition test to capture the influence of each variable on economic growth. Findings The study constructed a composite index for both male and female human capitals by taking education and health as a proxy for human capital. The empirical findings reveal that female human capital is significant and positively related to economic growth in both short run and long run, while male human capital is positive but insignificant to the economic growth; same is the case for physical capital, it implies that such investment regarding female human capital needs to be reinforced. Further, there is an evidence of a long-run causal relationship from female human capital, male human capital and physical capital to economic growth variable. The results of variance decomposition show the importance of the female human capital variable is increasing over the time and it exerts the largest influence in change in economic growth. Research limitations/implications The empirical findings suggest that the Indian economy has to pay attention equally on the development of female human capital for short-run as well as long-run growth of the economy. This implies that the policy makers should divert more expenditure for developing support for female education and health. Originality/value To the best of authors’ knowledge, this is the first attempt to study the relationship between female human capital and economic growth in the context of the Indian economy.

Download Full-text

DETERMINAN PERTUMBUHAN EKONOMI

Journal of Management and Business ◽

10.24123/jmb.v6i1.103 ◽

2007 ◽

Vol 6 (1) ◽

Author(s):

Suyanto . ◽

Anika Widiana

Keyword(s):

Economic Growth ◽

Time Series Data ◽

Physical Capital ◽

Series Data ◽

Institutional Factor ◽

Positive Effects ◽

Long Run ◽

Stationary Test ◽

Short Run ◽

The Government

This study examines the determinants of Growth in Indonesia using time series data from the first quarter of 1980 to fourth quarter of 2000. The result of OLS regression model shows that labor, physical capital, human capital, openness, and an institutional factor give positive effects to economic growth in Indonesia. This finding supports the arguments presented by neo-classical economists. The effect of institutional variable (e.g. inflation), in particular, exhibit the intervention of the central bank and the government in inflation and economic growth. Since the estimators consist of autocorrelation, the stationary test is applied to test the integration degrees and co-integration methodology is adopted to examine the linear combination of selected variables. The Granger’s two step error correction model tells us that the short-run disequilibrium is divergent from time to time from the long-run equilibrium, with the moderate speed of divergence. However, at least the long-run OLS estimators are unbiased, consistent, and asymptotically normally distributed.

Download Full-text

Further Evidence on Export-Led Growth in the United Arab Emirates: Are Non-Oil Exports or Re-Exports the Key to Economic Growth?

Review of Middle East Economics and Finance ◽

10.1515/rmeef-2019-0007 ◽

2019 ◽

Vol 15 (2) ◽

Author(s):

Athanasia S. Kalaitzi ◽

Trevor W. Chamberlain

Keyword(s):

Economic Growth ◽

United Arab Emirates ◽

Capital Accumulation ◽

Physical Capital ◽

Wald Test ◽

Model Framework ◽

Causality Test ◽

Long Run ◽

Oil Exports ◽

Short Run

Abstract This study investigates the relationships between exports and economic growth in the United Arab Emirates. Understanding these relationships is important for purposes of establishing appropriate growth and development policies and strategies. The study uses an augmented Cobb–Douglas production function to examine the causality between non-oil exports, re-exports and economic growth over the period 1981–2012. To investigate the existence of a long-run relationship between the variables, the study performs the Johansen cointegration test, while the direction of the short-run causality is examined by applying the Granger causality test in a vector error correction model framework. A modified Wald test in an augmented vector autoregressive model is applied in order to find the direction of the long-run causality. This research provides evidence in support of an indirect short-run uni-directional causality from economic growth to re-exports, through physical capital accumulation and imports. As for long-run causality, the results show that a bi-directional causality exists between re-exports and economic growth in the UAE.

Download Full-text

A Dynamic Analysis of the Relationship among Human Development, Exports and Economic Growth in Pakistan.

The Pakistan Development Review ◽

10.30541/v48i4iipp.885-920 ◽

2009 ◽

Vol 48 (4II) ◽

pp. 885-920 ◽

Cited By ~ 2

Author(s):

Muhammad Afzal ◽

A. Rauf Butt ◽

Mr. Hafeez ur Rehman ◽

Ishrat Begum

Keyword(s):

Economic Growth ◽

Human Capital ◽

Human Development ◽

Granger Causality ◽

Capital Accumulation ◽

Physical Capital ◽

Causality Test ◽

Real Gdp ◽

Long Run ◽

Short Run

This study investigates the econometrically empirical evidence of both the short-run and long-run interrelationships among human development, exports and economic growth in an ARDL framework for Pakistan. This study also examines causal linkages among the said variables by applying the Augmented Granger Causality test of Toda-Yamamoto (1995). By using data on Pakistan’s real GDP, real exports and Human Development Index (HDI) for the period 1970-71 to 2008-09, three models have been estimated. The results show cointegration between economic growth, physical capital, real exports and human development when human development is taken as dependent variables. Furthermore, unidirectional Granger causality running from real GDP to real exports has been found in Bivariate, Trivariate and Tetravariate causality framework. The inclusion of HDI as a measure of human development reduces the physical capital share in real GDP whereas it improves the robustness of the regression model. Real GDP seems to provide resources to improve human development in only the long-run while human capital accumulation does not seem to accelerate real GDP both in the short-run and the long-run. The empirical results of the study do not support ‘export-led growth hypothesis’ and human capital-based endogenous growth theory in case of Pakistan, however, it does support ‘growth-driven exports hypothesis’ in case of Pakistan. JEL classification: O11 Keywords: Human Development, Exports, Economic Growth, ARDL, Causality

Download Full-text

Is Tourism a Key Factor for Economic Growth? Fresh Evidence from South Europe Using Panel Cointegration and PVAR Analyses

World Journal of Applied Economics ◽

10.22440/wjae.6.2.2 ◽

2020 ◽

Vol 6 (2) ◽

pp. 123-138

Author(s):

Ioannis Kostakis

Keyword(s):

Economic Growth ◽

Causal Relationship ◽

Labour Force ◽

Panel Cointegration ◽

Physical Capital ◽

Impulse Response Functions ◽

Long Run ◽

Fixed Capital Formation ◽

Key Factor ◽

Short Run

This paper brings fresh empirical evidence on the relationship between tourism and economic growth for five South European countries over the period 2000Q1-2018Q4 within a multivariate framework. PVAR and panel cointegration analyses are employed to infer the causal relationship between tourism and economic growth. Heterogeneous panel cointegration test reveals a long-run relationship between real GDP, labour force, gross fixed capital formation and tourism. Granger causality validates the bidirectional and unidirectional causal relationship between tourism, labour and economic growth and physical capital and economic growth, respectively. Simultaneously, impulse-response functions of PVAR model highlight the fact that short-run innovations might have a smaller impact on economic growth against a permanent long-run augmentation of these variables. Our findings might leave ample room for government policies to stimulate strategies for higher economic growth.

Download Full-text