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Relative Capital Shortage and Potential Output Constraint: A Gap Approach

  • J. M. Albala-Bertrand

Focusing on core-infrastructure capital vis-a-vis productive capital, we propose a macroeconomic method to estimate their optimal utilisation ratio in production and their relative shortage in any period. The method is based on an adapted two-gap model, estimated via linear programming, with application to Chile and Mexico over the 1950-2000 period. Core infrastructure appears to support a variable level of productive investment, relative capital shortage alternating and imposing constraints on potential output over time. This suggests an optimal investment trade off, based on a social opportunity cost that derives from the prevailing gap in any period.

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Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 21 (2007)
Issue (Month): 2 ()
Pages: 189-205

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Handle: RePEc:taf:irapec:v:21:y:2007:i:2:p:189-205
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