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Relative Capital Shortage and Potential Output Constraint: A Gap Approach

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  • J. M. Albala-Bertrand

Abstract

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.

Suggested Citation

  • J. M. Albala-Bertrand, 2007. "Relative Capital Shortage and Potential Output Constraint: A Gap Approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(2), pages 189-205.
  • Handle: RePEc:taf:irapec:v:21:y:2007:i:2:p:189-205
    DOI: 10.1080/02692170701189094
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    References listed on IDEAS

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    1. André A. Hofman, 2000. "The Economic Development of Latin America in the Twentieth Century," Books, Edward Elgar Publishing, number 1534.
    2. Moguillansky, Graciela, 1999. "La inversión en Chile: ¿el fin de un ciclo de expansión?," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2084 edited by Cepal, December.
    3. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
    4. Hofman, André A., 2000. "The economic development of Latin America in the twentieth century," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1650 edited by Eclac, December.
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    Cited by:

    1. Jose Miguel Albala-Bertrand, 2007. "Net Capital Stock and Capital Productivity for China and Regions: 1960-2005. An Optimal Consistency Method," Working Papers 610, Queen Mary University of London, School of Economics and Finance.

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