The relative price of capital and economic structure

Samaniego, Roberto M.; Sun, Juliana Yu

doi:10.1016/j.red.2020.01.004

Cited by 6 publications

(6 citation statements)

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“…We also follow Ilyina and Samaniego (2011), Samaniego and Sun (2015) and Samaniego and Sun (2020) in defining technology as a measure related to the total factor productivity growth. Technological characteristics are then captured by the features of capital, inputs and labour, which can be summarized as follows: Investment‐specific technical change measures the rate of decline in the price of capital goods relative to the price of consumption and services.…”

Section: Methodsmentioning

confidence: 99%

Cross‐border technology investments in recession

Sun,

Zheng

2023

Canadian J of Economics

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Utilizing industry‐level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we evaluate how cross‐border technology investments respond to economic recessions. We find that FDI embedded with intensive research and development (R&D) drops when the destination market is in a recession and the source market is in a normal state and recovers to the pre‐recession levels when both destination and source markets are in recession. However, there is little evidence that recessions affect cross‐border investments in other aspects of technology measured by the penetration of robots, intellectual property products and information and communications technology (ICT). The response of R&D‐intensive FDI to recessions is particularly pronounced in deep and long recessions, during the propagation stage of recessions and in destination markets with relatively weak institutional protection of intellectual property and rule of law, loose FDI regulation and high financial development. Our findings are limited to advanced markets: there is no evidence that R&D‐intensive FDI from or to emerging markets responds to either destination or source market recessions.

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Section: Methodsmentioning

confidence: 99%

Cross‐border technology investments in recession

Sun,

Zheng

2023

Canadian J of Economics

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“…Alongside that, prior work (Collins & Williamson, 2001; Lian et al, 2020; Restuccia & Urrutia, 2001; Samaniego & Sun, 2020) has indicated that the temporal profiles of the relative price of investment goods are distinct from one country to another. They have also shown that the relative price of capital fluctuates wildly across countries, but that these differences have decreased over time.…”

Section: Stylised Factsmentioning

confidence: 99%

“…According to the related literature, the differences observed in the levels and trends of the relative price of investment goods between countries may be accounted for by differences in economic policies, particularly the trade policy (Cai et al, 2015; Estevadeordal & Taylor, 2013; Johri & Rahman, 2020; Lian et al, 2020) and the fiscal policy (Jones, 1994; Sarel, 1995), disparities in economic structure and industry composition (Samaniego & Sun, 2020), efficiency in producing exportable goods that might be traded for machinery and equipment goods relative to efficiency in other sectors (Hsieh & Klenow, 2007; Lian et al, 2020), price discrimination practices adopted by some exporters (Alfaro & Ahmed, 2010), and distortions linked to corruption, bureaucracy, and institutions (Alejandro & Carlos, 1970; Easterly, 1993; Restuccia & Urrutia, 2001; Schmitz, 2001). A thorough explanation of the sources of differences observed in terms of the RPI levels in Africa as well as their trends goes beyond the scope of this article, needing, therefore, further empirical investigations.…”

Section: Stylised Factsmentioning

confidence: 99%

“…Technological progress 3 Mainly the composition of capital rather than the composition of noncapital. 4 Hsieh and Klenow (2007), Samaniego and Sun (2020), and Lian et al (2020) attributed price disparities in capital goods to technological factors. In this work, we postulate that a society's institutional underpinnings provide incentives that have a direct impact on productivity and efficiency.…”

Section: Theoretical Modelmentioning

confidence: 99%

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The impact of capital goods prices on Africa's economic performance

Moummad

Ezzahid

Zoglat

2022

South African J Economics

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Over the last four decades, the relative price of investment goods in Africa has gone through a relatively large decrease, resulting in a steady convergence towards the levels recorded in high-income countries. This fact begs the following question: To what extent might the relative price decrease be a driving force behind the economic performance of this continent? The paper addresses this question from the perspective of a panel ARDL approach, using the Solow growth model-augmented with barriers to investment-as a framework. The results reveal that a one-unit decrease in the relative price of investment leads, in the long term, to a 4% increase in per capita GDP, an increase that could be neutralised by a 6.5 percentage points decrease in the savings rate. The findings contribute to the case for a policy mix that combines policies geared towards reducing investment distortions with those promoting savings mobilisation.

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“…9 Our interest in medium term trends in the relative price of investment is shared by Karabarbounis and Neiman (2014) which links the fall in the relative price of investment to the recent global fall in labor share; however, changes in the relative price of investment are driven by exogenous shocks to the productivity of the investment sector in that study. Samaniego and Sun (2020) study trends in the relative price of capital across nations and show that cross-country differences in the composition of consumption and capital sectors combined with exogenous trends in investment specific technological progress can account for these facts. We share an interest in exploring the quantitative im-8 Our model is also related to the literature that links the relative price of investment to growth, investment, income and productivity differences across nations.…”

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confidence: 99%

The Rise and Fall of India’s Relative Investment Price: A Tale of Policy Error and Reform

Johri

Rahman

2022

American Economic Journal: Macroeconomics

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India’s relative price of investment rose 44 percent from 1981 to 1991 and fell 26 percent from 1991 to 2006. We build a simple DGE model, calibrated to Indian data, in order to explore the impact of capital import substitution policies and their reform post-1991 in accounting for this rise and fall. Our model delivers a 23 percent rise before reform and a 31 percent fall thereafter. GDP per effective labor was 3 percent lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal, and a 71 percentage point reduction in tariff rates, raised GDP per effective labor permanently by 20 percent. (JEL E22, E23, F13, O11, O16, O19)

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The relative price of capital and economic structure

Cited by 6 publications

References 25 publications

Cross‐border technology investments in recession

Cross‐border technology investments in recession

The impact of capital goods prices on Africa's economic performance

The Rise and Fall of India’s Relative Investment Price: A Tale of Policy Error and Reform

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