Questions tagged [capital]

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What does the term “non-commercial, patient equity” mean in its entirety?

Source: https://www.undp.org/sites/g/files/zskgke326/files/publications/2018%20DREI%20Off-Grid%20Full%20Report%20Final%20(20190306).pdf (pg. 15) This term is used to describe financing in solar mini-...
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Which countries should i remove from a panel data based on the coefficients for capital accumulation

My question may sound more econometrical than about economics at the begining, but it is the contrary. I am working with a panel data of about 150 countries and it is cointegrated. My variables are ...
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What is the relation between “Capital Market Line” and “Capital Asset Pricing Model (CAPM)”?

I asked this question on Personal Finance and Money but was asked to ask it here. On the Coursera course Portfolio and Risk Management, on Week 2, I am having trouble finding the link between the ...
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1answer
36 views

What is the implication of perfectly reversible capital?

I am reading the lecture note in labor economics by Acemoglu and Autor. In the chapter of basic search model, they assume capital is perfectly reversible, and argue that "Perfect reversibility ...
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4answers
85 views

What happened when the money from share issuance is spent?

Let's assume that new bank is incorporated and it issued 100 000 shares with nominal value odf $100. Let's also assume that all shares are sold for the same price, so bank now has 10 million dollars. ...
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1answer
34 views

Treatment of natural disasters and wars in consumption of fixed capital

Assets destroyed by natural disasters and wars are not included in consumption of fixed capital (CFC) in the US NIPA or the UN SNA. Suppose though that the US decided to start including such asset ...
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99 views

Capital accumulation equation in steady-state (OLG model)

So I was given a question to derive the equation for aggregate capital accumulation. $K_{t+1}$, and explain if the economy has a stationary steady-state with zero growth. The model is as follows, ...
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3answers
184 views

What is the state of the art in capital theory?

In the first half of the 20th century a great deal was written about capital theory, including writers such as Hayek, Böhm-Bawerk, Sraffa, Knight, Robinson and Fisher. Many of these figures debated ...
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1answer
59 views

What is the main difference between FDI and short run capital inflows/outflows?

What is the main difference between FDI and short run capital inflows/outflows? I feel like both are quite similar in their nature but I don't understand the distinction between the two fully. Many ...
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606 views

What's the logic behind dividing rental price of capital and wage rate by price level?

I've just started to learn macroeconomics and I think even the teachers can't get what's the price level and why we divide by it in order to find for example real economic profits. Textbook says "...
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37 views

Static Profit Maximization Short Run Shut Down Decision

In considering whether to stay open or shut down in the short run, a firm compares its revenues to its “avoidable costs”. We usually think of these avoidable costs as variable costs, but of course ...
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1answer
127 views

What does it mean that households provide the four factors of production?

I've learned that the factors of production are Labor, Land, Capital and Entrepreneurship. I've also learned that households, or units of people living under one roof, supply these resources. But I'm ...
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2answers
114 views

What does “capital used as structure” means?

I'm in the progress of reading a paper and I came across the fragment below: Second, we assume that producers rent machines from a capital stock. Capital can also be used as structures in both ...
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1answer
59 views

Piketty's explanation of elasticity of substitution (from his book Capital in the 21st century)

I have some trouble following the explanation of the elasticity of substitution between capital and labor and its implications on p189. Take this part: The relevant question is whether the elasticity ...
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References on foreign ownership of domestic assets

In Piketty's Capital in the 21st Century, he occasionally analyzes the ownership of domestic assets by foreign countries. On p. 192, he writes: Japan and Germany have accumulated quite significant ...
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Was Adam Smith correct about the relative marginal productivities of capital in agriculture, manufacturing, and trade?

Adam Smith (1776): No equal capital puts into motion a greater quantity of productive labour than that of the farmer. After agriculture, the capital employed in manufactures puts into motion the ...
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1answer
40 views

Capital/Income Ratio in Pikketty's Capital

In Capital by Thomas Pikketty, https://www.robertdkirkby.com/blog/2015/summary-of-piketty-i/, he states that World War I and World War II were the main reasons why the Capital Income to Labour Income ...
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32 views

What's the difference of economic capital and liquidity buffer?

Economic capital is what for example a bank has and uses in order to stay solvent. Isn't this in a way a liquidity buffer? or what would be the difference between them?
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31 views

Solow model: effect on a sudden fall in population? [closed]

my question is, what happens in the Solow model when a sudden fall in population happens? let's say a bomb killed many people.
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4answers
50 views

How does capital investment (factory, plant, etc.) benefit the region they are located in?

Generally, capital investment is always good for the economy, but I am not sure about the underlying mechanism. For example, if a car factory is built in a certain state, does it improve the economy ...
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1answer
35 views

Why does the bond market induce efficient allocation of capital?

Going from this quote by Bryan Collins of Fidelity on China's economy: One of the nice things we see from the development of a domestic bond market is that it starts the process of pricing ...
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129 views

What is “industrial capitalism”?

What's the difference between "industrial capitalism" and "agrarian capitalism" and "mercantilism" and the "industrial revolution" and the 20th century ideas of "Keynesianism"? Is agrarian capitalism-...
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427 views

The TYPICAL law of motion of capital

Consider a typical macro firm set-up where the capital can be produced from output goods using a linear technology. It costs some X units of output good to make a unit of the capital, and the capital ...
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Looking for help with Solow Model Question [closed]

The question is this: Suppose there is a production function of $Q=F(K, L)=\sqrt{K}\sqrt{L}$. Suppose that MPC=0.8 and the labor force is growing at a rate of 0.05 per year. Also labor force ...
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1answer
105 views

In the context of banking, how (if at all) do the terms 'capital', 'net worth', and 'equity' differ?

In banking, are the three terms capital, net worth, and equity simply identical and exact synonyms? If not, how do they differ? (Aside: And what about in other contexts? For example, does the same ...
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463 views

Cobb-Douglas production function, given $w$ get $r$ regardless of input levels. Why?

There is a market economy with technology given by: $$Y = K^\alpha L^{1-\alpha} \tag{1}$$ Firms behave competitively and input prices are: $$r = \alpha K^{\alpha-1}L^{1-\alpha} = \alpha(\frac{L}{K})...
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37 views

Macroeconomic models with labor-replacing capital?

I am reading article http://public.gettysburg.edu/~tlin/research/robots-main.pdf "A New Keynesian Model with Robots: Implications for Business Cycles and Monetary Policy" and I wonder how actual this ...
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77 views

Market Theory: Upper limit of capital/weatlth accumulation?

Politicians often bicker about how big the government should be when it comes to redistributing wealth. Question: My question is simple; would a laissez-faire approach to the market always result in ...
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16 views

Return on Capital Invested - what to include in 'capital employed'

The formula for ROCE is: ROCE = net profit before tax / capital employed Where capital employed is long-term liabilities + share capital + retained profit. However, I've only used this in very ...
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2answers
733 views

How can energy consumption be an indicator of per capita availability of capital?

"An important indicator of low capital per head available in developing countries is the consumption of energy". I could not decipher the concept.
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2answers
127 views

What are exactly considered resources in modern economics?

I'm taking a basic course in economics and I'm trying to understand what the term "resources" really mean in this context. Reading this article, I found out that in classical economics, resources are ...
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1answer
56 views

In Mankiw's Macreoconomics, how come capital is assumed to be fixed while investment is assumed to be variable?

I'm looking at Greg Mankiw's Macroeconomics (7th edition), at the model presented in chapter 3: $Y = C + I + G,$ where $Y$ is total output, $C = C(Y-T)$ is consumption, $T$ are net taxes (fixed by ...
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571 views

What does it mean when capital is immobile as opposed to having full mobility?

The economist Rudolf Hilferding refers to the immobility of capital to be able to respond to market signals. What does he mean by this and why is capital immobile?
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38 views

Which way is the pendulum swinging with regards to “Access to Capital”

The premise is said best by the economist George Magnus in 2015: "Advances in technological productivity gains are benefiting a limited number of people. The principal rewards of modern technology ...
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1answer
690 views

Difference between Outflow of capital and Flight of capital

I may sound stupid to ask this question but pardon me for that. What's the different between Outflow of capital and Flight of capital? I googled about both terms but couldn't find how they differ from ...
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51 views

Welfare function in General Capital model (Search and Matching)?

i'm working on a model from the Mortensen textbook: "Wage dispersion why are similar workers paid differently?". To be precise, i'm working on the model about general capital. In this case, capital is ...
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1answer
2k views

Is the capital-output ratio in developing countries low or high?

For a developing economy, I've seen sources claiming that the capital-output ratio (more commonly known as ICOR) is high (e.g. here and here), while other sources claiming that it's low, like below (...
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5answers
711 views

In GDP growth studies, are factors of production measured as stock or flows?

Consider the following cases: One machine (capital) is used by multiple producers within one year. For instance, farmers renting tractors from the same company. In this case, in terms of GDP, there ...
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405 views

Is Artificial Intelligence a completely new (and underestimated) production factor?

Accenture research defines Artificial Intelligence as completely new production factor along labour and capital. Is such notion acceptable by economists? As far as I understand then every asset of AI ...
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Where does capital come from?

Sorry if this is a birds and the bees type question. Where does capital come from? And I am not talking human capital (which to my mind is skills basically). I suppose I'm taking about financial ...
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370 views

Solow model, time and steady state

Suppose we have a Solow model: $$ Y(t)=C(t)+I(t) $$ $$ I(t)=sY(t) $$ $$ \dot K=I(t)-δK(t) $$ With a given Cobb-Douglas: $$ Y(t)=Z(t)K^aL^{1-a} $$ $$ y(t)=Y(t)/L(t) $$ $$ k(t)=K(t)/L(t) $$ $$ y=...
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Corporate use of offshore cash

Recently Microsoft floated a \$17 billion bond to finance the purchase of LinkedIn (remind me to delete my account). Some might wonder why a company with nearly \$100 billion in cash would need to ...