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Article
Idle Capital and Long-Run Productivity
Contributions in Macroeconomics (2009)
  • Carl-Johan Dalgaard
Abstract

This paper examines the joint determination of long-run income per worker and capital utilization. Comparatively low (optimal) rates of capital utilization may arise in poor economies in response to weak underlying structural characteristics. The quantitative implications of variable capital utilization are also explored. It is demonstrated that adding endogenous capital utilization to the Solow model implies a rate of convergence in line with empirical estimates and that controlling for capital utilization has important consequences for the results stemming from cross-country growth and levels accounting.

Keywords
  • Capital Utilization,
  • Growth,
  • Convergence,
  • Total Factor Productivity
Publication Date
February 23, 2009
Citation Information
Carl-Johan Dalgaard. "Idle Capital and Long-Run Productivity" Contributions in Macroeconomics Vol. 3 Iss. 1 (2009)
Available at: http://works.bepress.com/carl_johan_dalgaard/1/