209 research outputs found
Trusting only whom you know, knowing only whom you trust: the joint impact of social capital and trust on individualsâ economic performance and happiness in CEE countries
This paper demonstrates that bridging and bonding social capital as well as social trust interdependently affect individualsâ earnings and happiness. Based on crosssectional World Values Survey 2000 data on individuals from eight Central and Eastern European countries (CEECs), we provide evidence that majority of citizens of these countries have likely fallen in a âlow trust trapâ where deficits of bridging social capital and trust reinforce each other in lowering individualsâ incomes and happiness. Apart from gradual modernization and economic growth, also increases in labor market participation are identified as a potential way out of this âtrapâ, because employed people in CEECs tend to have statistically significantly more bridging social capital and more trust. While assessing robustness of our empirical results, we have found a high risk of regressor endogeneity and omitted variables bias, generally overlooked in earlier studies. These issues are carefully addressed in the current contribution.bridging social capital, bonding social capital, social trust, CEE countries, earnings, happiness
Social Capital, Well-Being, and Earnings: Theory and Evidence from Poland
We study the relationship between two distinct dimensions of social capital (bridging and bonding social capital) and the personal performances of individuals: their reported subjective well-being (SWB) and earnings. A theoretical model is put forward which explains the sources and dynamics of social capital formation. It predicts an inverse U-shaped relationship between any type of social capital and SWB, an inverse U-shaped relationship between bridging social capital and earnings, and an unambiguously negative impact of bonding social capital on earnings. The key predictions of the model are confirmed using cross-section survey data from the 2005 wave of the âSocial Diagnosisâ survey program conducted in Poland. Very low levels of bridging social capital observed in Poland imply that it is unambiguously beneficial to invest in it: both SWB of individuals and their earnings would increase in such case.bridging social capital, bonding social capital, earnings, subjective well-being, Poland
A microfoundation for normalized CES production functions with factor-augmenting technical change
We derive the aggregate normalized CES production function from idea-based microfoundations where firms are allowed to choose their capital- and labor-augmenting technology optimally from a menu of available technologies. This menu is in turn augmented through factor-specific R&D. The considered model yields a number of interesting results. First, normalization of the production function can be maintained simultaneously at the local and at the aggregate level, greatly facilitating interpretation of the aggregate production functionâs parameters in terms of the underlying idea distributions. Second, in line with earlier findings, if capital- and labor-augmenting ideas are independently Weibull-distributed then the aggregate production function is CES; if they are independently Pareto-distributed, then it is CobbâDouglas. Third, by disentangling technology choice by firms from R&D output, one can draw a clearcut distinction between the direction of R&D and the direction of technical change actually observed in the economy, which are distinct concepts. Fourth, it is argued that the Weibull distribution should be a good approximation of the true unit factor productivity distribution (and thus the CES should be a good approximation of the true aggregate production function) if a âtechnologyâ is in fact an assembly of a large number of complementary components. This argument is illustrated with a novel, tractable model of directed (factor-specific) R&D. Finally, it is shown that all our results carry forward to the general case of n-input production functions.CES production function, normalization, Weibull distribution, direction of technical change, directed R&D, optimal technology choice
Knife-edge conditions in the modeling of long-run growth regularities
Balanced (exponential) growth cannot be generalized to a concept which would not require knife-edge conditions to be imposed on dynamic models. Already the assumption that a solution to a dynamical system (i.e. time path of an economy) satisfies a given functional regularity (e.g. quasi-arithmetic, logistic, etc.) imposes at least one knife-edge assumption on the considered model. Furthermore, it is always possible to find divergent and qualitative changes in dynamic behavior of the model â strong enough to invalidate its long-run predictions â if a certain parameter is infinitesimally manipulated. In this sense, dynamics of all growth models are fragile and "unstable".knife-edge condition, balanced growth, regular growth, bifurcation, growth model, long run, long-run dynamics
Human Capital, Aggregation, and Growth
The famous Mincer equation regressing log earnings on years of schooling is derived from a linear human capital accumulation equation at the individual level. Even if the cross-sectional Mincer equation holds at the level of individuals, it does not hold at the macro level of countries because aggregation of human capital has to take into account its vintage structure: human capital is embodied in people of different generations whose lifespan is finite. Finiteness of peopleâs lives imposes also a limit on the potential of human capital accumulation to drive aggregate economic growth. Aggregate human capital accumulation may however become an engine of growth thanks to human capital externalities (knowledge spillovers). We use these findings to revisit the assumptions of the well-known UzawaâLucas growth model from an aggregation perspective.human capital accumulation, Mincer equation, aggregation, vintage structure, balanced growth
Knife-Edge Conditions in the Modeling of Long-Run Growth Regularities
Balanced (exponential) growth cannot be generalized to a concept which would not require knife-edge conditions to be imposed on dynamic models. Already the assumption that a solution to a dynamical system (i.e. time path of an economy) satisfies a given functional regularity (e.g. quasi-arithmetic, logistic, etc.) imposes at least one knife-edge assumption on the considered model. Furthermore, it is always possible to find divergent and qualitative changes in dynamic behavior of the model â strong enough to invalidate its long-run predictions â if a certain parameter is infinitesimally manipulated.knife-edge condition, balanced growth, regular growth, bifurcation, growth model, long-run dynamics
A New Class of Production Functions and an Argument Against Purely Labor-Augmenting Technical Change
This paper follows Jones (2005) in his approach to deriving the global production function from microfoundations. His framework is generalized by allowing for dependence between the Pareto distributions of labor- and capital-augmenting developments. Using the Clayton copula family to capture this dependence, we derive a âClayton-Paretoâ class of production functions that nests both the Cobb-Douglas and the CES. Embedding the resultant production function in a neoclassical growth framework, we draw conclusions for the long-run direction of technical change. Jonesâ result of Cobb-Douglas global production functions and purely labor-augmenting technical change hinges on the assumption of independence of marginal Pareto distributions. In our more general case, the shape of local production functions matters for the shape of the global production function, and technical change augments both factors in the long run. Furthermore, the elasticity of substitution between capital and labor may exceed unity and thus yield endogenous growth.global production function, technology frontier, CES, Pareto distribution, Clayton copula
Productivity differences across OECD countries, 1970â2000: the world technology frontier revisited
We re-estimate the World Technology Frontier (WTF) non-parametrically, using the Data Envelopment Analysis method, with a dataset covering both OECD country-level and US state-level data on GDP per worker and the stocks of physical capital, unskilled labor, and skilled labor. The WTF 2000 is found to be spanned by a few US states such as Colorado, Connecticut, Delaware, Nevada, Utah, and Washington, while the USA as a whole falls markedly behind these leader states. The auxilliary use of US state-level data adds extra precision to cross-country growth and levels accounting exercises. We also calculate the "appropriate technology vs. efficiency" decomposition, disentangling dynamic shifts of the WTF from movements along the WTF. Our results indicate that previous estimates of the WTF might have been downward biased and previous estimates of technical efficiency might have been upward biased.world technology frontier, decomposition, country-level data, US state-level data, development accounting, growth accounting
On the measurement of technological progress across countries
We construct 14 alternative measures of technological progress for 19 OECD countries over the period 1970â2000, distinguishing between measures of productivity gains actually obtained in a given country (TFP growth, Malmquist index) and technological progress at the world technology frontier (potential TFP growth, the âfrontier shiftâ index). We then compare these measures according to a range of characteristics, shedding light on some of their relative weaknesses and strengths. We find that these characteristics are sensitive to the precision of estimates of the world technology frontier, and then we demonstrate that this precision can be increased substantially by allowing for imperfect substitutability between unskilled and skilled labor and using US state-level data apart from cross-country data for estimating the world technology frontier. Because none of the 14 measures dominates all others on all dimensions, we conclude that the choice of appropriate measurement method should be suited to the question addressed in each particular study.technological progress, world technology frontier, countrylevel data, US state-level data, production function, DEA
Determinants of the Labor Share: Evidence from a Panel of Firms
This paper analyzes the sources of labor share variations and its general downward trend, observed recently in most European economies. Using a unique quarterly firmlevel panel dataset from the Polish enterprise sector in the period 1995â2008, we quantify the impacts on the observed variation in labor shares of (i) firmsâ âdemographicsâ including firmsâ age as well as their entry and exit behavior, (ii) selected labor market characteristics such as newly filled vacancies, labor market tightness, and human capital measures, (iii) firm- and sector-level measures of export intensity, competition, and ownership structure, and (iv) shifts in the sectoral make-up of GDP. We also test the potential cross-effects among these variables. We conclude that while sector-specific factors, changes in the ownership structure, and the accumulation of human capital explain a large fraction of the observed downward trend in the labor share, labor market characteristics, market structures and firm demographics are robust correlates of labor share changes at high frequency.labor share, firm-level data, sectoral composition, labor market tightness, firm demographics
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