Premium Essay

Role of Capital Accumulation

In: Other Topics

Submitted By rebeccabirchx
Words 583
Pages 3
Why do developing economies and many development economists emphasise so much the role of capital accumulation in the development process?
Capital is a factor of production that can be accumulated through investment. It can be split into at least two groups, physical capital and human capital. Physical capital includes the value of all existing machines, equipment, buildings and infrastructures. Human capital involves the value of productive investments embodied in the labour force. High capital per worker is likely to reflect high living standards and I will discuss strengths and weaknesses of this argument, and its role for developing economies using the neo-classical growth model.
Neoclassical Growth Model
The neo-classical growth model attempts to explain long-run economic growth by looking at capital accumulation, labour or population growth, and increases in productivity. We assume savings are based on a constant fraction of total income (Y).
Yt – Ct = St = sYt
Where Y is income in year t, C is consumption, S is the gross aggregate savings, s is the ratio of saving to GDP or the gross savings rate.
There are two relationships between output and capital. Firstly, the level of capital stock determines the amount of output produced; also the amount of output determines the level of saving and in turn, the capital accumulation over time. We assume capital is subject to decreasing returns so when the capital per worker is already high, the impact on output of the last unit of capital accumulated will always be less than the one before. Another assumption, for simplicity, is that there is no technological developments or labour force growth.
In the short run the model predicts the rate of growth of the economy is determined by capital accumulation, which is in turn determined by the savings rate (s) and the rate of deprecation.
Kt+1 = s f (kt ) − (n…...

Similar Documents

Premium Essay

The Basics About Money and Its Accumulation

...The Finance & Accumulation Protocol to achieve financial independence -The Basics of Money and its accumulation- "You will never achieve wealth in spending money, wealth can only be achieved in saving money." -Helmut Ament- Why do we Fail with Money? We fail with Money and we don’t build wealth and financial security because we make a few key, consistent errors. These are common errors that are caused by our mental “hard-‐wiring” and our inability to calculate the long-term effects of our decisions. If you learn About these errors and you overcome them, you can take control of your financial life and Your financial success. If you don’t learn about these errors, you’ll keep making them, and you’ll keep going down a path of having less success with money, less control of your life, and less of a feeling of security and safety for yourself and others. If you want to get control of your financial life... and get control of your ENTIRE life... then you must educate yourself and learn how to do it. No one is going to do it for you. A Lot of people think that money is something you dont talk about, something bad. Some people think that people who have money are “bad people” and people who are poor are “good people.” Regardless of how you feel about money, what you think money is, or whether or not you think that people who have money are good or bad, it’s likely that you DO FEEL one thing: Most people feel like... Money controles their lives ...

Words: 6807 - Pages: 28

Premium Essay

What Is the Role of Women in Fostering Development? Discuss the Influence of Gender on Household Expenditure, Human Capital and Policymaking.

...What is the role of women in fostering development? Discuss the influence of gender on household expenditure, human capital and policymaking. (word limit : 1500) Women paly an immense role in development, be it physical, moral or emotional development. Their role in eradicating hunger and poverty and development and current challenges is becoming very crucial (EGM, 2011) as is evident from the 56th session of the Commission on the Status of Women (CSW) in 2012, who prioritized their theme on these key areas. They contribute in a multitude of ways to ensure their family and society is brought out of poverty. Many of the activities performed by the rural women are not identified as “economically active employment” in the national accounts but are important and essential for their households (FAO, 2011). They constitute a major share of labor on the family farms (UNIFEM, 2005). Prominent gender inequalities often keep then from enjoying their social and economic rights. Access to decent work, which they could use in turn to leverage upon to improve their socio-economic condition, is limited too for them (FAO/IFAD/ILO, 2010b). As a result of this a huge social and economic cost is imposed on the society and it also tends to impede the process of rural development with problems that include lags in agricultural produce (EGM, 2011). They play an important role in translating the agricultural produce into food and nutrition security and also for the well being of their......

Words: 751 - Pages: 4

Premium Essay

Term Paper on the Role of Lease Financing in the Capital Market Development

...TERM PAPER ON THE ROLE OF LEASE FINANCING IN THE CAPITAL MARKET DEVELOPMENT TERM PAPER ON “The Role Of Lease Financing In The Capital Market Development” Supervisor: - Mrs. Afsana Yesmin Lecturer Faculty of Business Studies Premier University Chittagong. Submitted by: - Priyanka Das ID# 0613111771 Program: BBA Faculty of Business Studies Major in Finance Premier University, Chittagong Faculty of Business Studies Submitted in partial fulfillment of the requirement for the Bachelor of Business Administration Submission Date: 28th November, 2011 Letter of Transmission Date: 28th November 2011 To The Supervisor Faculty of Business Studies Premier University, Chittagong. Subject: Submission of term paper Sir, It is indeed a great pleasure for me to be able to hand over the result of my hardship of the report on “the role of lease financing in the capital market development”. I take the opportunity to thank you very much for your kind cooperation, supervision and suggestion in preparing this report. I have enjoyed the whole program with great spirit and enthusiasm. I fervently hope that you will find this report worth reading. I hope you will accept my report. Yours sincerely, Priyanka Das ID: - 0613111771 Program:-BBA Major in Finance ACKNOWLEDGEMENT I have the pleasure to express my gratitude to the Almighty God, who has......

Words: 768 - Pages: 4

Premium Essay

Role of Research in Human Capital Development

...on human capital is a recent development. For a long time, concern has been placed on other factors of production. It was not until recently that attention shifted to Human capital which has led to a massive wave of investment in human capital development. Human capital development is the term used in referring to factors such as education, health, and other variables that can raise productivity. It refers to the ability to perform work so as to produce economic value. To a large extent this a function of the skills and knowledge workers acquired through education and experience. When viewed from a macro perspective, Human capital represents the human factor in an organization and this consists of the combined intelligence, skills and expertise of workers that gives the organization its distinctive character. It consists of those elements of the organization that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of an organization. Increasing attention is being given to Human capital due to globalization and its attendant saturation of the labour market. Concern about the issue has been being compounded by the recent downturn in the various economies of the world. This has led Organisations to appreciate the need to leverage on the workforce for competitive advantage in order to thrive and keep ahead of the competition. One major way of doing this is through human capital......

Words: 1592 - Pages: 7

Premium Essay

The Role of Human Capital Development in Organisational Effectiveness

...ABSTRACT Nobel Prize-winning economist Gary S. Becker, who coined the term “human capital,” says that “the basic resource in any company is the people. Loosely speaking, human capital corresponds to any stock of knowledge or characteristics the worker has (either innate or acquired) that contributes to his or her “productivity”. Human capital – the productive capacity that is embedded in people – is one of the most important contributors to the growth in nations’ output and standard of living. Many organizations in developed countries now are highly dependent on their human capital for their competitive advantage. Their market value increasingly depends on their intangible assets, such as their knowledge, core competencies, and organizational capabilities (Ulrich and Smallwood, 2003) Globalisation and technological changes have also increased the importance of human capital in recent years, to the point that there are now only two options to sustain high profits and high wages in developed nations: escalating the skill levels of individuals or developing superior capacity for managing those skills and “human capital” more broadly. Employers have responded to these new phenomena by increasing wages for employees with more skills and by increasing their use of downsizing and other methods (such as “offshoring”) intended to reduce labour costs. Human capital is a valuable concept; it recognizes that people should be treated as assets rather than as an expense. The most......

Words: 323 - Pages: 2

Premium Essay

Capital Accumulation

...Capital Accumulation Definition of Capital accumulation This is the process of acquiring additional capital stock which are used in the productive process. Capital involves man made equipment that is used to make other goods such as machines and factories. Note Capital accumulation will need to exceed the amount of capital necessary to overcome depreciation. i.e. some capital wears out, so capital investment is necessary to overcome this. Capital accumulation involves additional purchases of capital. Definition of 'Economic Growth' An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation. For comparing one country's economic growth to another, GDP or GNP per capita should be used as these take into account population differences between countries. Definition of 'Economy' The large set of inter-related economic production and consumption activities which aid in determining how scarce resources are allocated. Definition of 'Elasticity'A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes. Calculated as: | | Investopedia explains 'Elasticity’Elasticity is used to assess......

Words: 473 - Pages: 2

Premium Essay

Accumulation of Wealth

...The accumulation of capital is the gathering or amassing of objects of value as judged by one’s perceived reproductive interest group, the increase in wealth through, concentration, or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money (whealth in the form of profit, rent, interest, royalties, capital may also be seen as a form of capital, investment in one’s personal abilities, such as through education, to improve their function and therefore increase their income potential in a market economy. Poverty is the inability of getting choices and opportunities of human dignity. It means lack of basic capacity to participate effectively in society. It means not having enough to feed and cloth a family, not having a school or clinic to go to not earn one’s living, not having acces to credit. It means insecurity powerlessness and exclusion of individuals house holds and communities. A developing country, also called a less developed country (LDC) is a nation with a lower living standard, underdeveloped industrial base and low human development index (HDI), relative to other countries. The development of a country is measured with statistical indexes such as income per capital (per person), (gross domestic product), life expectancy, the rate of literacy (ignoring reading addiction). Developing countries like Tanzania, Kenya, Ethiopia and others are, in general countries that have not achieved a significant degree of......

Words: 1548 - Pages: 7

Premium Essay

Roles of Sc and Bnm in Developing the Capital Market

...focusing their effort in developing confidence and trust in the Malaysia’s capital market all these years. Based on the Capital Market Masterplan 2, Securities Commission has introduced a strategic blueprint to develop the capital market over the next 10 years. The strategies introduced, are to unleash the competitive dynamics that will enable our markets to utilize the domestic savings more effectively for capital formation. The strategies include increasing the capacity and efficiency of the capital market in financing investment requirements for economic growth, addressing efficiency of savings intermediation, deepening secondary market liquidity, facilitating scale-driven strategies, identifying new growth opportunities as well as building capacity and strengthening information infrastructure to support the transition to an electronic environment. On the other hands, Securities Commission will also facilitate the expansion of capital market intermediaries to enable the offering of a wide range of domestic and international products and services. Furthermore, they will also work with the intermediaries, helping them to evolve their business models by allowing decoupling and further outsourcing for specialized activities in trading, promoting small and mid-cap companies, for pre-Initial Public Offering (IPO), for retail clients and for market-making and trading across markets. To promote capital market research, Securities Commission has introduced an online unit trust...

Words: 668 - Pages: 3

Premium Essay


...CAPITAL BUDGETING DECISION 1. Meaning Capital budgeting denotes situation where funds are invested immediately and returns are expected after a year. In growing orgnisation capital budgeting is more or less continuous process and it is carried out by top management. The role of any Finance Manager is to critically evaluate proposal, evaluation of alternative proposal and select best one. The following are the some of the cases where heavy capital investment may be necessary. A) Replacement of fixed assets: - To replace old Assets. To buy Asset with latest technology. B) Expansion: - It means increase in production capacity to meet additional demand. C) Research and Development: - It is required for those industry where technology in changing rapidly. D) Diversification: - To set up factories, to fulfill need of various markets. To reduce dependency on one market E) Miscellaneous: - To meet legal norms, such as investment in pollution control equipment. 2. Features and significance of capital budgeting Capital budgeting includes investment for long firm funds for long term and their utilisation. Capital budgeting decision affects profitability of firm. Therefore these decisions are very important. A wrong decision taken by finance manager may affect firm’s profitability. The relevance and significance of capital budgeting may be stated as follows. A) Involvement of heavy funds: - Capital budgeting decision requires large amount of......

Words: 3551 - Pages: 15

Free Essay

The Role of Capital in Resolving Agency Conflicts Between Different Groups of Bank Stakeholders.

...The role of capital in resolving agency conflicts between different groups of bank stakeholders. 1. Introduction This essay discusses the role of capital in resolving agency conflicts between different groups of bank stakeholders, by discussing two papers. The first paper is a descriptive paper written by Berger, Herring, and Szego (2005), called “The Role of Capital in Financial Institutions”. The second paper, “Caught in Between Scylla and Charybdis? Regulating Bank Leverage When There Is Rent Seeking and Risk Shifting”, is a theoretical paper by Acharya, Mehran and Thakor (2013). Both articles examine agency conflicts between different bank stakeholders and how capital could be used to reduce these conflicts. The rest is the paper is structured as follows. Chapter 2 discusses the paper of Berger et al., starting with the question why markets require financial institutions to hold capital, and why financial institutions differ from other companies. Next, we discuss why regulators require capital and why the market is not self-regulating, followed by the unintended consequences of regulation. Chapter 3 discusses the paper of Acharya et al., which starts by discussing two important moral hazard problems. Next, the base model is examined, followed by the extended model. Finally, we conclude by summarizing our findings and discuss the validity of both papers. 2. The role of capital in financial institutions The theoretical paper of Berger, Herring and Szegö (1995),......

Words: 5370 - Pages: 22

Premium Essay

Role of Venture Capital in Bangldesh

...this paper, an attempt is made to delineate the deficiencies of the existing financial system in Bangladesh to cater to financing needs of SMEs or new potential entrepreneurs and a proposal has been given to develop the venture capital industry to meet financing and non-financing needs of SMEs. SMEs play a vital role within Bangladesh’s economy in terms of creation of industrial outputs and generation of employment. Even though they play a significant role they face problems in securing investment or manage finance to develop their ideas or to expand their existing business. It is not possible for Bangladesh to accelerate economic growth without catering to the financing needs of SMEs, Thus, the paper proposes the development of the venture capital industry as an additional financial intermediary to Cater to financing and non-financing needs of SMEs. The paper discusses available sources of finance for SMEs and the Constraints of these sources. There are basically three sources from which SMEs may receive finance. These are banks, non-government organizations (NGOs) and the capital market. Then, we discuss the advantages that venture capitalists have over banks in catering to the funding needs of SMEs. It is argued that venture capitalists perform the role of ‘active investors’ by way of offering both financial and non-financial commitment to the investee company, which is essential in a market characterized by a high level of uncertainties. Also, it is argued that venture......

Words: 3834 - Pages: 16

Free Essay

Human Capital

...WHY IS THE HUMAN CAPITAL SO IMPORTANT FOR THE ECONOMIC DEVELOPMENT OF MAURITIUS? Introduction This assignment aims to look at the special importance of human capital to the economy of Mauritius. First, we go about defining the concept of human capital. Afterwards, there will be a section which talks a bit about the history of the economy of Mauritius. Then we will move on to another section which tries to explore the different factors as to why and how human capital is important to Mauritius. We will then have a concluding remark. We will end by some possible recommendations.   What is human capital? Adam Smith defined human capital as follows: “Fourthly, of Justin Slay’s types of capital which is of the acquired and useful abilities of all the inhabitants or members of the education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense which certainly repays afterwards. The use of the term in the modern neoclassical economic literature dates back to Jacob Mincer's article "Investment in Human Capital and Personal Income Distribution" in the Journal of Political Economy in 1958. Theorists......

Words: 4728 - Pages: 19

Premium Essay

The Role of Capital Market Intermediaries in the D

...The Role of Capital Market Intermediaries in The Dot- Com Crash of 2000 1. What is the intended role of each of the institutions and intermediaries discussed in thecase for the effective functioning of capital markets? The institutions and intermediates roles are: a)Venture capitalists: VC provides capital for companies in their early stages of developmentand screen good business ideas and entrepreneurial teams from bad ones. It employs savvy business people who worked closely with their portfolio companies to both monitor andguide them to a point where they have turned a business idea into a well- managed fullyfunctional company that could stand on its own and nurture the companies until theyreached a point where they were ready to face the scrutiny of the public capital markets after an IPO. b) Investment Bank Underwriters: It helps entrepreneurs in the actual process of doing initial public offerings, and provides advisory financial services, helped the companies price their offerings, underwrite the shares, and introduce them to investors. c) Sell-Side analysts: The main role of sell side analysts was to publish research on publiccompanies and involved forming relationships with and talking to the managements of thecompanies, following trends in the industry, and ultimately making buy or sellrecommendations on the stocks.d) Buy-Side Analysts and Portfolio Managers: They are usually assigned to a group of companies within a certain industry and......

Words: 704 - Pages: 3

Free Essay

Working Capital

...SUMMER TRAINING REPORT SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DEGREE IN INTERNATIONAL BUSINESS WORKING CAPITAL MANAGEMENT On Kotak Mahindra Group INDUSTRY GUIDE FACULTY GUIDE AMITY INTERNATIONAL BUSINESS SCHOOL, NOIDA AMITY UNIVERSITY – UTTAR PRADESH TABLE OF CONTENTS Chapter No. Subject Page No. Ch No.1 Executive Summary…………………. 6 Ch No.2 Research Methodology……………… 7 2.1 Primary Objective(s)…………. 2.2 Hypothesis…………………… 2.3 Research Design……………… 2.4 Sample Design……………….. 2.5 Scope of the Study……………. 2.6 Limitations……………………. Ch No.3 Critical Review of Literature……….. 9 Ch No.4 Company Profile ……………………. 18 Ch No.5 Industry Profile……………….. 21 Ch No.6 SWOT Analysis…………………. 45 Ch No.7 Data………………………………….. 46 7.1 Collection……………………… 7.2 Primary Data…………………… 7.3 Secondary Data….…………….. Ch No.8 Working Capital- Overall View……… 53 Ch No.9 Findings & Analysis…………………. 100 Ch No.10 Recommendations…………………… 112 Ch No.11 Bibliography…………………………. 114 Ch No.12 Annexure…………………………….. 115 12.1 Tables…………………………. 12.2 Graphs………………………… Ch No.13 Case Study...…..................................... ......

Words: 27597 - Pages: 111

Free Essay

Primitive Accumulation

...A CASE STUDY:VALLARPADAM INTERNATIONAL CONTAINER TRANSSHIPMENT TERMINAL,KOCHI Objective: Checking the relevance of Marx’s concept of primitive accumulation through India’s largest single operator container terminal which is the first project of India operate in a special economic zone. OVERVIEW OF THE PROJECT The Kochi International Container Transshipment(ICTT),locally known as the Vallarpadam Terminal,is a container transshipment facility which is part of kochi port.It is the only transshipment port in India,and is situated in kochi,in the state of Kerala.The terminal makes Kochi a key centre in the shipping world reducing India’s dependence on foreign ports to handle transshipment.The project area has been declared SEZ with a road link to connect vallarpadam with two national highways,besides a 8.5 km rail link connectivity to the railway natworks.The work on the rail link project began in june2007 and completed in 2010. Prime minister Dr.Manmohn singh opened this container terminal to nation on 12thfeb2011. There are three phases in this project.In the first phase there will be 600m quay length and a draft of more than 15m,when the terminal may handle 1 million TEU container annually by the end of 2012.In the second phase the capacity will be enhanced to 3 million TEU’S by the end of 2014.In the third phase the terminal may handle even upto 5.5 million TEU’S.The total cost of the project is estimated...

Words: 707 - Pages: 3

Bollywood Movie 2015 | Jikulumessu saison 1 épisode 9 | LED Heelys Wheels Boys Girls Shoes Skates Kids Light Up Roller Skate Trainers