Technology and Economics (1991) / Chapter Skim
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How Competitiveness Can Be Achieved
How Competitiveness Can Be Achieved
Pages 3-46
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From page 8... ...
Obviously, as better data and methodologies became available in more recent years, this work, described in the recent book by Jorgenson and Landau, Technology and Capital Formation (1989) , did shrink the residual, but it did not go away.
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From page 13... ...
Now, despite the lower energy costs, most countries have not recovered all the way from the pre-1973 conditions, for a variety of individual reasons, including the time lags needed to adjust to the seismic economic changes of the last two decades, as we discuss later. In studying these many events, we have found that physical capital formation has contributed far more significantly to longer-term economic growth than earlier estimates had suggested.
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From page 16... ...
The first step is to decompose the contributions of capital and labor inputs into the separate contributions of capital and labor quality and the contributions of capital stock and hours worked. Capital stock and hours worked are a natural focus for input measurement, since capital input would be proportional to capital stock if capital inputs were homogeneous, while labor input would be proportional to hours worked if labor inputs were homogeneous.
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From page 17... ...
The omission of growth in labor quality destroys the link between investment in human capital and economic growth, while the omission of growth in capital quality leads to drastic underestimation of the impact of investment in nonhuman capital on economic growth. The results we have presented which involve two different effects, one of measurement and the other of composition or aggregation, reveal that the assumption of homogeneous capital and labor inputs is highly misleading.
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From page 19... ...
There is no question that relative proportions matter. The experience of the centrally planned economies has clearly demonstrated that massive increases in physical capital that are not accompanied by improvements in the technology and the quality of the labor force lead to rapidly diminishing returns, just as the neoclassical model would suggest.
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From page 20... ...
This feedback loop of negative externality well comports with our own industrial experiences, and often leads to excess capacity in one industry, and our measured low productivity therein, as happened in chemicals. Our detailed study of the chemical process industries and other high-tech industries demonstrates that industry level measurements are not only feasible, but are also meaningful and correspond to the actual events.
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From page 26... ...
Despite the substantial consensus on these perceptions reached at a large Washington conference on "Saving" The Challenge for the U.S. Economy," organized by the American Council for Capital Formation in October 1989, and the general agreement by many political figures, there appears to be no political consensus at this time to establish a set of policies that would favor high investment and savings rates and be of greater predictability.
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From page 28... ...
The subject of educational deficiencies in the United States is too well known to warrant detailed discussion, but is included in the following section on microeconomic considerations. The striking effect of labor quality has already been shown.
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From page 29... ...
Thus, we commonly think of innovation in terms of entirely new products or components transistors, television, computers, and petrochemicals-and much less in terms of the perhaps equally important subsequent cost reductions or performance improvements. This type of technical innovation has long been a traditional American strength.
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From page 30... ...
, including especially the United States, to gain global market share, the lapanese may well acquire some of the American skills in entrepreneurial R&D and innovation, although their efforts to adapt to other cultures have not always been successful. There is a general movement by firms in the major industrial centers to spread into the other major markets, not only to be nearer their customers, but also to hedge their exposure to the variability of national policies.
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From page 35... ...
Thus, Boskin's growth path 3 in Figure 5 shows that with these interactions between technological change, physical capital, and labor quality, a higher rate of capital investment can move the economy to a higher rate of medium-term economic growth, as well as lead to an upward shift in the level at any given time. He believes, therefore, and we concur, that the rate of investment and technical change are positively linked.
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From page 36... ...
However, the basic consideration for physical capital investment is the cost of capital, which is the pretax return required to pay all taxes and depreciation on plant and equipment. Public investments in infrastructure are also important, and are certainly sensitive to the savings rates.
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From page 37... ...
This adjustment is in the form of a lower investment pattern and entailed mammoth equity retirements, mergers and acquisitions, leveraged buyouts, privatization, and "junk" bonds. Restructuring responds to the need to make physical capital productive enough to withstand the high real interest rates required by the financial markets.
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From page 39... ...
It seems increasingly clear that the United States now has a new economic rival, as the Soviet Union retreats, and one far more formidable because it is so difficult to develop a "crisis" mentality to spur Americans to change their habits. This Japanese investment boom is fueled by an enormous capital market that channels the large Japanese private savings into productive enterprises.
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From page 40... ...
This embodiment links investment in new knowledge for growth with investment in new physical capital. Similarly, opportunities for technical advance are linked with investment in R&D and human capital.
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From page 42... ...
1989. Capital Formation and Productivity Growth: An International Comparison.
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From page 44... ...
1983. Interindustry Differences in Productivity Growth.
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From page 46... ...
Pp. 259-292 in Technology and Capital Formation, D
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