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SOURCES OF VARIATION IN THE CAPITAL‐OUTPUT RATIO IN THE UNITED STATES PRIVATE BUSINESS SECTOR, 1909‐1959 *
Author(s) -
Tourette John E. La
Publication year - 1965
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.1965.tb00993.x
Subject(s) - economics , capital intensity , capital (architecture) , technological change , capital deepening , capital formation , labour economics , demographic economics , financial capital , macroeconomics , profit (economics) , microeconomics , geography , archaeology
SUMMARY This paper examines the source of variation in the capital coefficient for the United States private business sector during the 1909‐1959 period. These sources are the composition of capital, the age of capital, and the nature of technological progress. In the multiple regression and correlation analysis, these sources are measured by the ratio of plant to equipment, the weighted average age of the stock of capital, and a proxy time trend, respectively. The regression equations provide a high degree of explanation of the variation in the capital coefficient. The significant correlations involve the average age and the nature of technological progress in the 1923‐1941 period and the plant‐equipment ratio and the nature of technological progress in the 1946‐1959 period. In both periods the correlations between the time trend and the capital coefficient indicate that capital‐saving technological progress is the most impor‐tant factor contributing to the secular decline of the coefficient. In the earlier period, the capital‐saving bias to technological progress is reinforced by factors associated with the rising age of capital, while in the postwar period the falling plant‐equipment ratio tends to offset it somewhat. However, it appears that the intensity of the capital‐saving bias may be higher in the post‐war period than in the 1923‐1941 period. The implications of the falling capital coefficient for equilibrium growth are examined in terms of the Harrod‐Domar model. Since a capital‐saving bias in technological progress tends to cause the rate of growth of productive capacity to exceed the rate of growth of aggregate demand, it is suggested that the nature of technological progress may be one of the factors contributing to the secular GNP gap for the United States since 1958.