Economic Growth and the Financial Economics of Capital Accumulation under Shifting Technological Change
This paper develops a simple and practical framework for characterizing (long-run) economic growth and fluid capital accumulation under shifting technological change. The framework specifies a technological change that depends on exogenous and endogenous factors as well as the interaction between the two sets of factors, and therefore allows for the evaluation of the (a) output/capital ratio via capital stock (balance sheet) adjustments and intensities, (b) value added stream of income via changes in cash flows (income statements) at some rates of change constrained to be compatible with ( c) financial economics of the feasible accumulation of capital investment (sources and uses of funds statement). The model is simple - it is only a single-equation reduced form of a transcendental production function - yet one which can be estimated either as (1) a single equation, (2) three single equations, or (3) a system of three seemingly unrelated equations.
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