Testing Capital-Skill Complementarity Across Sectors in a Panel of Spanish Regions

The aim of this paper is to examine the evidence for capital-skilled labor complementarity in six different activity sectors using aggregate production function specifications and a time-series, cross-section panel of Spanish regions. Estimation results have troubles finding evidence that supports departing from the Cobb-Douglas assumption and, if anything, find capital skill substitutablity in most sectors. They also suggest that capital skill complementarity might be a sector-specific phenomenon. El objetivo de este artículo es examinar la evidencia sobre la hipótesis capital-habilidad en seis diferentes sectores de actividades usando funciones de producción agregada en un panel de regiones españolas. Los resultados de la estimación tienen problemas para encontrar evidencia que apoye el separarse del supuesto Cobb-Douglas y, si acaso, encuentran substituibilidad entre el capital y la mano de obra cualificada en la mayoría de los sectores. También sugieren que la complementariedad capital-habilidad puede ser un fenómeno específico a ciertos sectores.Complementariedad de los inputs, funciones de producción agregada, datos de panel. Input complementarity, aggregate production function, panel data.

CAN TRANSITION DYNAMICS EXPLAIN THE INTERNATIONAL OUTPUT DATA?

This paper studies the transition dynamics predictions of an R&D-based growth model, and evaluates their performance in explaining income disparities across nations. We find that the fraction of the observed cross-country income variation explained by the transitional dynamics of the model is as large as the one accounted by existing steady-state level regressions. Our results suggest that the traditional view of a world in which nations move along their distinct balanced-growth paths is as likely as the one in which countries move along adjustment paths toward a common (very long-run) steady state.Transition Dynamics; Income Disparities; Growth.

IS THE SPEED OF CONVERGENCE A GOOD PROXY FOR THE TRANSITIONAL GROWTH PATH?

This paper compares transitional dynamics in two alternative R&D non-scale growth models; one includes endogenous human capital, whereas the other does not. We show that focusing on the speed of convergence to discriminate between the two models can be misleading. Our analysis suggests that a better alternative to discriminate between different growth theories is studying the whole adjustment path predicted by them. In addition, we find that the introduction of human capital makes the speed of convergence predicted by the model much less sensitive to exogenous shocks. This last result offers theoretical support to the similar convergence speeds estimated by the literature in different samples.Convergence, R&D, human capital, asymptotic speed, transitional dynamics

PATENTS, R&D AND LAG EFFECTS: EVIDENCE FROM FLEXIBLE METHODS FOR COUNT PANEL DATA ON MANUFACTURING FIRMS

Hausman, Hall and Griliches (1984) and Hall, Griliches and Hausman (1986) investigated whether there was a lag in the patent-R&D relationship for the U.S. manufacturing sector using 1970¿s data. They found that there was little evidence of anything but contemporaneous movement of patents and R&D. We reexamine this important issue employing new longitudinal patent data at the firm level for the U.S. manufacturing sector from 1982 to 1992. To address unique features of the data, we estimate various distributed lag and dynamic multiplicative panel count data models. The paper also develops a new class of count panel data models based on series expansion of the distribution of individual effects. The empirical analyses show that, although results are somewhat sensitive to different estimation methods, the contemporaneous relationship between patenting and R&D expenditures continues to be rather strong, accounting for over 60% of the total R&D elasticity. Regarding the lag structure of the patents-R&D relationship, we do find a significant lag in all empirical specifications. Moreover, the estimated lag effects are higher than have previously been found, suggesting that the contribution of R&D history to current patenting has increased from the 1970¿s to the 1980¿s.Innovative activity, Patents and R&D, Individual effects, count panel data methods.

The Quest for Productivity Growth in Agriculture and Manufacturing

We develop a theory to explain the transition from stagnation to modern growth. We focus on the forces that shaped the evolution of total factor productivity in agriculture and manufacturing across history. More specifically, we build a multisector model of endogenous technical-change and economic growth. We consider an expanding-variety setup with rising labor specialization and two different R&D technologies, one for agriculture and another for manufacturing. As a consequence, total factor productivity in the model can increase via two different channels. First, population growth allows larger levels of specialization of land and labor in the economy that bring efficiency gains. This type of productivity improvement is capital saving, but can not generate sustained growth. Technical change is also possible by investing in R&D. Unlike specialization, new technologies generated in this way are land and labor augmenting, and are the key to modern growth. In the model, the economy has not incentives to invest in R&D until a minimum knowledge base is available to researchers. This is in line with ideas contained in Mokyr (2005). To make possible the accumulation of this minimum knowledge base, we assume that learning-by-doing is the implicit underlying force that leads to specialization. However, land and labor specialization is based on knowledge whose nature differs in agriculture and in manufacturing. More specifically, whereas this knowledge is farm-specific in agriculture, mainly concern with the acquisition of uncodified information about local conditions of soil and whether, specialization in manufacturing is the result of general knowledge, mainly codified, that contributes at a larger extent to the knowledge base.stagnation, modern growth, specialization, learning-by-doing, R&D, Knowledge base

PATHS OF DEVELOPMENT IN OPEN ECONOMIES: THE ROLE OF LAND

This paper shows, within a Heckscher-Ohlin version of the two-sector neoclassical growth model, that land, besides having long-run effects, is also a main determinant of the speed of convergence toward the steady state when there are cross-sector capital share differences. This result stands in sharp contrast to the predictions of standard neoclassical growth frameworks, and calls for a reinterpretation of the conditional-convergence and the resource-curse findings. More specifically, the model predicts that the former finding requires the existence not only of diminishing returns but also of relatively small differences in capital shares across sectors. With respect to the latter finding, our results imply that it may be a consequence of purely transitional effects of natural riches on growth, and that it can not be interpreted as evidence that natural inputs necessarily harm long-run welfare. We produce empirical evidence on the relationship between land, income levels, and growth rates, and present data on cross-sector capital shares. We claim that most of that evidence is consistent with the predictions of the model.Small-Open Economy, land, long-run income, convergence speed

SOVEREIGN RISK, FDI SPILLOVERS, AND ECONOMIC GROWTH

This paper studies the effect of sovereign risk on capital flows from rich to poor nations in the context of a two-country model where Foreign Direct Investment (FDI) creates positive externalities in domestic production. We show that if externalities are large, a developing country never expropriates foreign assets, and behaves as under perfect enforcement of foreigners' property rights, jumping to the steady state in one period. If externalities are absent, a developing country always expropriates foreign assets and, then, there are no capital flows in equilibrium, as occurs in autarky. If externalities are of a medium size, our model can account for scarce capital flows from rich to poor nations, as well as other key features of the data, such as rising-over-time patterns of foreign capital and FDI in developing countries. In addition, the model offers an economic rationale for the FDI restrictions observed across nations.Sovereign risk, Foreign direct investment, Externalities, Incentive compatibility

Convergence in a dynamic Heckscher–Ohlin model with land

Convergence among nations that share the same preferences and technologies is a key result of the closed-economy neoclassical growth framework that has received substantial support in the data. However, Heckscher–Ohlin versions of the two-sector neoclassical growth model predict that nations that differ in their capital–labor ratios may not converge to the same steady state, even if they are identical in all other aspects. This is a puzzling result that warns us about potential dangers of international trade. In this paper we show that when land, an input in fixed supply, is introduced into the model, international trade in goods no longer limits the capacity of poor nations to catch up with the advanced world

CAPITAL-SKILL COMPLEMENTARITY? EVIDENCE FROM A PANEL OF COUNTRIES

Since Griliches (1969), researchers have been intrigued by the idea that physical capital and skilled labor are relatively more complementary than physical capital and unskilled labor. This capital-skill complementarity hypothesis has received renewed attention recently, as researchers have suggested that this phenomenon might account for rising wage inequality between skilled and unskilled workers in several developed countries. In this paper we consider the cross-country evidence for capital--skill complementarity using a time-series, cross-section panel of 73 developed and less developed countries over a 25 year period. In particular, we focus on three empirical issues. First, what is the best specification of the aggregate production technology to address the capital-skill complementarity hypothesis. Second, how should we measure skilled labor? Finally, is there any cross-country evidence in support of the capital-skill complementarity hypothesis? Our main finding is that we are unable to reject the null hypothesis of no capital-skill complementarity using our panel data set.Input Complementarities, Production Function Estimation