Advanced Search
MyIDEAS: Login

Output, Investment, and Growth in a World of Putty-Clay: Working Paper 2007-07

Contents:

Author Info

  • Mark Lasky
Registered author(s):

    Abstract

    This paper presents a putty-clay model of capital that proceeds from profit maximization to an analytic solution for aggregate investment that fits the data well. The key innovation is a production function in which a geometric average of the capital-labor ratio embedded in each unit of capital replaces the aggregate capital-labor ratio in the standard Cobb-Douglas production function. The accelerator in this model depends on the growth rate of output in excess of labor productivity at full employment, rather than on the growth rate of output alone as in previous work. Growth of labor hours at full employment is an important driver of investment. Expectations of faster productivity growth boost current investment. The effect of productivity growth on the real rate of return in steady state is smaller than in the traditional neoclassical model. Cash flow and restrictions implied by the neoclassical model are not significant when added to the estimating equations. The putty-clay assumption allows growth of the capital stock to be split into its capital-widening and capital-deepening components. The model explains the sharp rise in the gap between capital income and business fixed investment in the early 2000s.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/81xx/doc8164/2007-07.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Congressional Budget Office in its series Working Papers with number 18701.

    as in new window
    Length:
    Date of creation: 01 May 2007
    Date of revision:
    Handle: RePEc:cbo:wpaper:18701

    Contact details of provider:
    Postal: Second and D Streets, SW, Washington, DC 20515
    Phone: (202)226-2600
    Fax: (202)226-2714
    Web page: http://www.cbo.gov
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Ragunathan V, . "Lease Evaluation-Yet Again," IIMA Working Papers WP1984-11-01_00611, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. Anonymous, 2006. "Front Materials," Choices, Agricultural and Applied Economics Association, vol. 21(3).
    3. Anonymous, 2006. "Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), October.
    4. Anonymous, 2006. "Front Materials," Western Economics Forum, Western Agricultural Economics Association, vol. 5(01).
    5. Anonymous, 2006. "Inside Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
    6. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," NBER Working Papers 5260, National Bureau of Economic Research, Inc.
    7. Anonymous, 2006. "Cover and Table of Contents," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(01), April.
    8. Zhu Wang, 2006. "Online banking comes of age," TEN, Federal Reserve Bank of Kansas City, issue Win, pages 22-25.
    9. Kap-Soo Oh, 2006. "Promoting the Asian bond market," BIS Papers chapters, in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 243-245 Bank for International Settlements.
    10. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
    11. Anonymous, 2006. "Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
    12. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    13. anonymous, 2006. "Community profile: Arizona," Community Investments, Federal Reserve Bank of San Francisco, issue Oct, pages 9.
    14. Anonymous, 2006. "Cover and Contents Page," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(03), November.
    15. Anonymous, 2006. "Contents Pages," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
    16. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
    17. Anonymous, 2006. "Washington Scene," Choices, Agricultural and Applied Economics Association, vol. 21(2).
    18. Anonymous, 2006. "Contents Page," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
    19. Anonymous, 2006. "Contents and Cover Page," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 34(2).
    20. Anonymous, 2006. "Contents Page," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), October.
    21. Anonymous, 2006. "Cover And Contents Pages," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(02), August.
    22. Wang, Hung-Jen, 2006. "Stochastic frontier models," MPRA Paper 31079, University Library of Munich, Germany.
    23. Anonymous, 2006. "Cover Page and Contents," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(02), August.
    24. anonymous, 2006. "Call for Nominations," Management Science, INFORMS, vol. 52(3), pages 472-472, March.
    25. Anonymous, 2006. "Front Materials," Choices, Agricultural and Applied Economics Association, vol. 21(2).
    26. Anonymous, 2006. "Contents Pages," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(01), March.
    27. Anonymous, 2006. "Editorial Information," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(01), March.
    28. Anonymous, 2006. "Cover and Contents Pages," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(01), April.
    29. Oecd, 2006. "Administrative decisions," Nuclear Law Bulletin, OECD Publishing, vol. 2006(1), pages 47-47.
    30. Ando, Albert K, et al, 1974. "On the Role of Expectations of Price and Technological Change in an Investment Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 384-414, June.
    31. Anonymous, 2006. "Contents and Cover Page," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 34(1).
    32. Anonymous, 2006. "Front Materials," Western Economics Forum, Western Agricultural Economics Association, vol. 5(02).
    33. Anonymous, 2006. "Washington Scene," Choices, Agricultural and Applied Economics Association, vol. 21(4).
    34. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
    35. Anonymous, 2006. "Contents Pages," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(02), July.
    36. Anonymous, 2006. "Front Materials," Choices, Agricultural and Applied Economics Association, vol. 21(4).
    37. Anonymous, 2006. "Front Material," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
    38. Anonymous, 2006. "Inside Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), October.
    39. Hidvegi, Zoltan & Wang, Wenli & Whinston, Andrew B., 2006. "Buy-price English auction," Journal of Economic Theory, Elsevier, vol. 129(1), pages 31-56, July.
    40. Oecd, 2006. "Décisions administratives," Bulletin de droit nucléaire, OECD Publishing, vol. 2006(1), pages 47-47.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cbo:wpaper:18701. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.