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Debt-Financed Knowledge Capital Accumulation, Capacity Utilization and Economic Growth

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  • Laura Carvalho
  • Gilberto Tadeu Lima, Gustavo Pereira Serra

Abstract

Motivated to some extent by the empirical significance of student loans to human capital accumulation, this paper incorporates debt-financed knowledge capital accumulation to a demand-led model of capacity utilization and growth. Average labor productivity varies positively with the average stock of knowledge capital across the labor force. Any increase in labor productivity ensuing from knowledge capital accumulation is fully passed on to the real wage, but insufficient aggregate effective demand, by generating unemployment, gives rise to underutilization of the knowledge capital capacity. Both the stability properties and financial fragility (in the Minskyan sense) of the long-run equilibrium outcome depend on how the debt servicing of working households is specified. The same dependence applies to how the rates of physical capital utilization and labor employment (where the latter also measures the rate of knowledge capital utilization) respond to changes in the ratio of working households’ debt to physical capital

Suggested Citation

  • Laura Carvalho & Gilberto Tadeu Lima, Gustavo Pereira Serra, 2017. "Debt-Financed Knowledge Capital Accumulation, Capacity Utilization and Economic Growth," Working Papers, Department of Economics 2017_32, University of São Paulo (FEA-USP).
  • Handle: RePEc:spa:wpaper:2017wpecon32
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    File URL: http://www.repec.eae.fea.usp.br/documentos/Carvalho_Lima_Serra_32WP.pdf
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    References listed on IDEAS

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    1. Mueller, Holger M & Yannelis, Constantine, 2017. "Students in Distress: Labor Market Shocks, Student Loan Default, and Federal Insurance Programs," CEPR Discussion Papers 11938, C.E.P.R. Discussion Papers.
    2. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 29(4), pages 267-279.
    3. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2007. "Macrodynamics of debt regimes, financial instability and growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(4), pages 563-580, July.
    4. Duncan K. Foley, 2003. "Financial fragility in developing economies," Chapters, in: Amitava Krishna Dutt (ed.), Development Economics and Structuralist Macroeconomics, chapter 8, Edward Elgar Publishing.
    5. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Citations

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    Cited by:

    1. Gilberto Tadeu Lima & Laura Carvalho, Gustavo Pereira Serra, 2018. "Human Capital Accumulation, Income Distribution and Economic Growth: A Neo-Kaleckian Analytical Framework," Working Papers, Department of Economics 2018_19, University of São Paulo (FEA-USP).

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    More about this item

    Keywords

    Knowledge capital; debt; capacity utilization; employment;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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