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Questions tagged [capital]

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relationship between renting a van and buying a van

I can buy a van and use it to deliver goods. The price of the van is X. Alternatively, I can hire the van, with a monthly price of Y. What does the economics theory tell about the relationship between ...
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1answer
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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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Adam Smith's accumulation of capital

Do I understand correctly, that when Adam Smith writes on capital accumulation he means both financial assets and equipment? Or does he mean only equipment used in production?
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When is cost of capital useful as hurdle rate?

Suppose we have an all-equity firm and no tax is assumed. The firm has two divisions, each division generating a growing perpetuity. Assume beta of each division, market risk premium, and risk free ...
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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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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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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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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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Elasticity of Substitution and Taxation

So I am trying to understand the impact of the elasticity of substitution in terms of taxation. I am carrying this out for the U.S. by firstly estimating a two-input CES production function. Chirinko (...
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1answer
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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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How does Free Cash Flow become well in excess of net income

In addition, lower capital expenditure (capex) requirements typically mean that the depreciation recorded on existing plant and equipment exceeds maintenance capex. This dynamic causes many slow-...
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1answer
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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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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
168 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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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
1k 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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4answers
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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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2answers
201 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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2answers
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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 ...