Advanced Search
MyIDEAS: Login to save this paper or follow this series

Can the Composition of Capital Constrain Potential Output? A Gap Approach

Contents:

Author Info

Abstract

Focusing on core-infrastructure capital vis-�-vis productive capital, we propose a macroeconomic method to determine both which type of capital shortage would be constraining potential output and what would be the optimal composition, or optimal ratio between these two types, of capital in any given period. This method is based on an adapted two-gap model, estimated via linear programming, and illustrated with the cases of Chile and Mexico over the 1950-2000 period. The results show that there appears to be an oscillating pattern over this period, with either type of capital shortage alternating each other. The results also show that, optimally, core infrastructure appears to support a variable level of productive investment over time. However, the shortage of productive capital would at least be as important as that of infrastructure capital, suggesting an optimal trade off between the two. That is, the social opportunity cost of investing in either type of capital would be determined by the gap between the optimal growth rates estimated from these two types of capital. For either type of capital, a macroeconomic shortage would mean that the economy as a whole is in a net state of shortage.

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.econ.qmul.ac.uk/papers/doc/wp510.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 510.

as in new window
Length:
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:qmw:qmwecw:wp510

Contact details of provider:
Postal: London E1 4NS
Phone: +44 (0) 20 7882 5096
Fax: +44 (0) 20 8983 3580
Web page: http://www.econ.qmul.ac.uk
More information through EDIRC

Related research

Keywords: Capital shortage; Potential output; Two-gap model; Linear programming;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Ernst R. Berndt & Bengt Hansson, 1991. "Measuring the Contribution of Public Infrastructure Capital in Sweden," NBER Working Papers 3842, National Bureau of Economic Research, Inc.
  2. J. M. Albala-Bertrand & E. C. Mamatzakis, 2001. "Is public infrastructure productive? Evidence from Chile," Applied Economics Letters, Taylor & Francis Journals, vol. 8(3), pages 195-198.
  3. E. C. Mamatzakis, 1999. "Testing for long run relationship between infrastructure and private capital productivity: a time series analysis for the Greek industry," Applied Economics Letters, Taylor & Francis Journals, vol. 6(4), pages 243-246.
  4. Edmar Bacha, 1989. "A three gap model of foreign transfers and GPD growth rate in developing countries," Textos para discussão 221, Department of Economics PUC-Rio (Brazil).
  5. Edmar Bacha, 1982. "Growth with limited supplies of foreign exchanges: a reappraisal of the two-gap model," Textos para discussão 26, Department of Economics PUC-Rio (Brazil).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ward Romp & Jakob de Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(s1), pages 6-52, 04.
  2. International Monetary Fund, 2010. "Public Capital and Growth," IMF Working Papers 10/175, International Monetary Fund.

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:qmw:qmwecw:wp510. 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: (Nick Vriend).

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.