Engels’ pause: Technical change, capital accumulation, and inequality in the british industrial revolution

The paper reviews the macroeconomic data describing the British economy from 1760 to 1913 and shows that it passed through a two stage evolution of inequality. In the first half of the 19th century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the 19th century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized. An integrated model of growth and distribution is developed to explain these trends. The model includes an aggregate production function that explains the distribution of income, while a savings function in which savings depended on property income governs accumulation. Simulations with the model show that technical progress was the prime mover behind the industrial revolution. Capital accumulation was a necessary complement. The surge in inequality was intrinsic to the growth process: technical change increased the demand for capital and raised the profit rate and capital’s share. The rise in profits, in turn, sustained the industrial revolution by financing the necessary capital accumulation. After the middle of the 19th century, accumulation had caught up with the requirements of technology and wages rose in line with productivity.     

Labour's share in twentieth-century Sweden: a reinterpretation

The distribution of national income between capital and labour is a classical theme in political economy. This paper takes a long-run perspective to the issue and asks two questions: How did the distribution of income between capital and labour develop in Sweden from 1900 to 2000? And how can this development best be explained? It is shown that labour's share in Sweden in the 100 years from 1900 to 2000 saw three important shifts, and the three shifts are analyzed. Around 1920, there was a surge in labour's share as workers mobilised in trade unions and universal suffrage and the eight-hour working day in manufacturing strengthened the bargaining power of workers. From 1950 until the late 1970s, there was another period of an increasing labour share, when the welfare state expanded and trade unions were strong. Contra the well-known postwar wage moderation analysis, there was no wage moderation in Sweden during the 1950s and 1960s, but rather the opposite: wages increased faster than productivity which caused a redistribution from capital to labour and reduced income inequality. The third shift occurred around 1980 when labour's share started a continuous decrease, beginning with several devaluations intended to increase profitability and competitiveness of Swedish business.     

Openness and economic growth in developing countries

Openness and Economic Growth in Developing Countries. — Openness appears to have a strong impact on economic growth especially in DCs which typically exhibit a high share of physical capital in factor income and a low share of labor. In the neoclassical growth model with partial capital mobility, physical capital’s share in factor income determines the difference in the predicted convergence rates for open and closed economies. With a 60 percent share as in many DCs, the convergence rates should differ by a factor of 2.5. The regression results for a sample of open and closed DCs roughly confirm this hypothesis.     

THE DETERMINANTS OF FINANCIAL DEVELOPMENT: INSTITUTIONS, OPENNESS AND FINANCIAL LIBERALISATION

This paper provides new evidence that sheds light on the influence of institutional quality, trade openness and financial liberalisation on financial market development, using data from 27 economies (the G-7, Europe, East Asia and Latin America) during 1980-2001. The dynamic panel data analysis results demonstrate that real income per capita and institutional quality are statistically significant determinants of banking sector development and capital market development. The trade openness, however, is more prominent in promoting capital market development. In terms of financial liberalisation, the empirical results suggest that domestic financial sector reforms tend to promote banking sector development, whereas stock market liberalisation is potent in delivering stock market development. Nevertheless, the financial liberalisation programmes are more responsive in developed economies.     

The political economy of income distribution in South Korea: The impact of the state's industrialization policies

A number of previous studies of economic growth and income distribution in South Korea, based largely on 1960s data, concluded that South Korea was an exception to Kuznets' ‘inverse U-pattern’ of income inequality. Also, it was regarded as an exception to the usual negative consequences predicted by dependency theory for an economy so dependent on foreign capital and world markets. This author presents more recent data — for the 1970s and early 1980s — in order to support his claim that the trend toward income equality that appeared in the 1960s was reversed in the 1970s. The author develops a thesis that stresses the role of the state in shaping the Korean political economy. He argues that it has been the strong South Korean developmentalist state in firm control of both domestic and foreign capital and its export-oriented industrialization policies that have been the principal determinant of the pattern of income distribution. He contests the usual explanation related to the level of economic development or external dependency per se.     

The East Asian model of economic development

Unlike existing models of the rapid growth of the East Asian economies that are based on stylised facts, this paper formulates a model by introducing an all‐encompassing (core) variable that explains the unique path to success in East Asia. Using three propositions, the model explains the transition from a backward economy to an industrial economy. Central to the model is policy‐augmented human capital (PAHC)—human capital with a road map for development—led by a capable leader. The model is unique in that it validates the critical role of human capital in a time of ‘high development theory’ when the emphasis was skewed towards the accumulation of physical capital, and the role of government at a time when interventionist policies were either failing elsewhere (in the 1950s and 1960s) or facing opposition (in the 1970s and 1980s). The success of the East Asian model provides evidence pointing to a preference for economic development over democracy.     

Profit: The entrepreneurial view

Summary The economic developments leading to the actual profit squeeze are described. A marked decline is found in the share of other income (which includes capital income) and also in returns on capital employed in various manufacturing industries between 1954 and 1978. The minimum profit rate, defined as critical profitability, is analysed. For companies wishing to maintain a 50/50 ratio between own capital and loan capital, a critical profit rate of 13% for December 1979 was calculated. This figure is based on an earnings yield of 14.5% on share capital (price/earning ratio 6.9%) and an interest rate on government bonds of 9.3%. This profit rate is the minimal required to attract capital at the rates demanded by the investors. The present critical profit rate is much higher than the average return on capital employed as calculated in this article.The author is Chairman of the Managing Board of Bank Mees & Hope N.V., but wrote this article under his personal responsibility. He owes a debt of gratitude to Drs. P. A. Geljon, Head of the Economic and Securities Research Department of Bank Mees & Hope N.V. for his contribution to the preparation of this article. Any shortcomings remain of course for the author's own account.     

Saving,productivity and national income: a discrete-time geometric framework

This paper proposes an alternative geometric framework for analysing the inter-relationship between domestic saving, productivity and income determination in discrete time. The framework provides a means of understanding how low saving economies like the United States sustained high growth rates in the 1990s whereas high saving Japan did not. It also illustrates how the causality between saving and economic activity runs both ways and that discrete changes in national output and income depend on both current and previous accumulation behaviour. The open economy analogue reveals how international capital movements can create external account imbalances that enhance income growth for both borrower and lender economies.     

PROBLEMS IN EXPANDING JAPAN'S IMPORTS OF MANUFACTURES FROM DEVELOPING ECONOMIES: A SURVEY*

The Japanese economy is now the second largest market economy, with a large trade surplus. And yet, Japan's imports of manufactures have long been very low relative to its GNP, when compared with other industrial countries; its ratio of manufactured imports to GNP was in the range of 2.1–2.7% in the 1980-87 period, as compared with 8.5–10.3% for the industrial countries as a whole or 4.7-7.2% for the United States. The share of developing economies in total imports of manufactures in Japan is about the same as, if not higher than, those for most other industrial countries. If Japan's ratio of manufactured imports to GNP were to rise in the future to approach closer to those of other industrial countries, Japan's imports of manufactures from developing economies could be two to three times what they are today, even if Japan's GNP does not increase at all and the share of developing economies in Japan's manufactured imports does not increase. This paper is an attempt to probe the potential of the Japanese market for imports of manufactures from developing economies in terms of rising ratio of such imports to GNP. The paper explores the reasons why Japan's ratio is exceptionally low, on the basis of existing literature. (a) Japan's ratio of manufactured imports to GNP has remained exceptionally low compared with those for other industrial countries. (b) Japan's ratio of manufactured imports from developing economies to GNP has remained distinctly low despite the recent surge in such imports. (c) If a part of the reason for the low ratio for Japan was a market access problem as often alleged, the problem is not with formal import barriers such as tariffs and formal non-tariff barriers because these barriers in Japan are no higher than in other industrial countries. As for informal import barriers, evidence found indicates that: (i) Administrative guidance and flexibly managed competition policy, which in the past had considerable effects of limiting imports, appear to have declined-in importance, but they still have import-limiting effects in certain areas. (ii) Market access difficulties involving import procedures, product standards, testing and certification requirements, which were enormous in the past, may have also decreased in severity over the last decade, but problems in these areas persist. (iii) There are aspects of the Japanese distribution system and practice that seem to make foreign access to the Japanese market significantly more difficult than the access by Japanese exporters to the markets in other industrial countries. Distribution in Japan suffers from overregulation. (iv) Users of manufactured products in Japan are sensitive to quality, perhaps more so, on the average, than in other industrial countries. Does the recent upsurge in Japan's imports of manufactures suggest that the traditional import behavior of Japan is changing? Japan's manufactured imports measured in yen increased by 18 and 27 percent in 1987 and 1988, respectively, and those coming from developing economies increased even more rapidly. There is also some evidence that price and income elasticities of demand for manufactured imports may have increased recently. These are encouraging, but it remains to be seen whether the trends will continue far enough into the future to bring Japan's import behavior more into line with those of other industrial countries. If they do, implications for the market prospects of manufactured exports from developing economies could be far-reaching. Outstanding questions are: (i) How much of the recent increase in manufactured imports is attributable to the appreciation of the yen (price effect)? How much is attributable to the increase in income or industrial output (income effect)? How much is attributable to removal of formal and informal import barriers effected so far (structural change)? Has consumer taste changed? (ii) Why have Latin American countries not been successful in promoting their exports of manufactures to Japan, when Asian exporters have been so successful? (iii) Up until now, the share of developing economies in Japan's manufactured imports has not been particularly low compared with those for other industrial countries, but is this share likely to fall or rise in the future? (iv) What is the likely impact of recently increased direct investment (DFI) by Japanese manufacturers in developing economies on the imports of their products into Japan?     

Why did socialist economies fail? The role of factor inputs reconsidered

This article presents new estimates for investment and new growth accounts for three socialist economies between 1950 and 1989. Government statistics reported distorted measures for both the rate and the trajectory of productivity growth in Czechoslovakia, Hungary, and Poland. Researchers have benefited from revised output data, but have continued to use official statistics on capital input, or estimated capital stock from official investment data. Investment levels and rates of capital accumulation were much lower than officially claimed and over‐reporting worsened over time. A setback in factor accumulation—both investment in equipment and labour input—contributed very significantly to the socialist growth failure of the 1980s.     

The Aggregate Production Function of the Finnish Economy in the Twentieth Century

This article uses the Bayesian approach to estimate the parameters of the normalized constant elasticity of substitution (CES) function with factor‐augmenting technical progress directly, rather than using derived first‐order conditions of profit maximizing behavior. Bayesian estimation is applied because maximum likelihood estimation is sensitive to the starting values of maximization, and the parameters typically fail to converge to the global optimum because of a multimodal likelihood. Thanks to a convenient prior distribution, the posterior simulation of parameters works fairly well. The results indicate that in the long run (over 100 years) the parameters for the elasticity of substitution and capital income share are intimately linked to the shape of capital‐augmenting technological progress. In particular, the linear restriction excludes the possibility that the speed of capital‐augmenting technological progress converges to zero, which seems to lead to upwardly biased estimates of the elasticity of substitution and income share parameters.     

中国双导型经济与人的生存和发展

文章认为,中国当前运行的经济是社会生产和分配由政府和资本共同主导的双导型社会主义市场经济。当前的中国双导型经济体制下,体现社会主义本质的多元资本非公有积累条件未设定、资本收益者责任的制度安排严重滞后、资本收益者的权利和义务不一致,这就必然造成政府对社会生产和分配失去控制,资本对劳动力收益的分占、非公有资本对公共资源的排他性使用和超占、强势资本对弱势资本的挤压、公有资本变异的现象不可避免。对人生存和发展保障来说,其造成的直接后果就是资本收益最大化不断给社会制造就业难、买房难、读书难、看病难、养老难等问题。中国必须做好社会主义的市场经济的制度建构工作,在体现社会主义本质的情况下实行社会主义市场经济的双导型生产和分配、在社会主义的制度安排内管理双导型生产和分配的全过程,对多元资本非公有积累条件进行社会主义改造。     

Human capital accumulation in emerging Asia, 1970–2030

Emerging Asian economies have made strong progress in improving educational capital in the past 40 years. High educational attainment, especially at the secondary level, has significantly improved emerging Asia's educational achievement. Regressions show that better parental education and income, lower income inequality, declining fertility, and higher public educational expenditures account for higher educational enrollment. But Asia's average years of schooling are forecast to increase to 7.6 years by 2030, from 7.0, significantly slower than the increase of 4.1 years from 1970 to 2010. That would put emerging Asia's educational capital in 2030 at only the 1970 level of the advanced countries, or still 3.5 years behind the level of advanced countries in 2010. For sustained human development, Asian economies must invest in improving educational quality and raising enrollment rates at the secondary and tertiary levels.     

ECONOMIC ANALYSIS ON THE URBAN–RURAL DISPARITY IN HUMAN CAPITAL IN CHINA

With China's economic development and capital accumulation in the industrial sectors, the human capital level of the labours moving from the rural areas could no longer meet the demand of the industrial sectors. Therefore, “structural shortage of technical labour” emerged in the labour market as a result of excess of demand for high‐skilled workers. Previous literature mostly focused on the relationship between rural human‐capital level and labour movement, income change and economic growth, but in this article, the authors focus on the study of the relative disparity of urban and rural human capital and labour movement, as well as the effect of the change of urban–rural human capital gap on industrial output, profit and social welfare. This article shows that bridging the urban–rural gap in respect of human capital level could not only improve the situation of the “structural shortage of technical labour,” but also have a positive effect on the general social welfare.     

Imperfect Competition, Economic Miracle, and Manufacturing Productivity Growth: Empirical Evidence from Taiwan

Several recent studies on total factor productivity (TFP) concluded that the East Asian economies benefited little from TFP growth. This study claims that the failure by previous studies to consider the effect of net indirect taxes and market imperfections resulted in the underestimation of the share of the contribution of labor input to factor income, which consequently led to the overestimation of capital share and understatement of TFP growth. Therefore, this study has modified the conventional approach of calculating factor shares by taking account of net indirect taxes and market imperfections and used the modified approach to estimate TFP growth in 16 Taiwanese manufacturing industries during the period 1979–1999. The conclusion drawn by the study is that TFP growth was the driving force behind the success of Taiwan's manufacturing industries, although many of these industries experienced a sharp decline in TFP during the 1990s.     

Do Capital Inflows Matter to Asset Prices? The Case of Korea*

In the present paper, we investigate whether capital flows induce domestic asset price hikes in the case of Korea. This issue is relevant for crisis‐hit economies trying to prevent a boom–bust cycle as well as in the formulation of macroeconomic policy objectives in emerging market economies. Korea has recently experienced large capital inflows, in particular a surge in portfolio inflows. Furthermore, asset prices, including stock prices, land prices and nominal and real exchange rates, have also appreciated. The empirical results, obtained using a vector autoregression model, suggest that capital inflow shocks have caused stock prices but not land prices to increase. The effects on the nominal and real exchange rates have been limited, which relates to the accumulation of foreign exchange reserves.     

International trade and income distribution: reconsidering the evidence

This article reassesses the link between international trade and income distribution. We argue that one way to assess the influence of international trade upon income distribution is to take account of each country’s specific trade patterns by measuring the changes in the factor content of trade. The econometric specification is based on changes in Gini indices (over non-overlapping 4-year intervals), computed exclusively from series drawn from the same source. Our results show that a change in the factor content of trade has a significant impact on income distribution. The sign and magnitude of this impact is conditional on the national income level. We find that an increase in the labor content of trade raises income inequality in poor countries, but reduces it in rich countries (the reverse is true for the capital content of trade). In particular, we show that in the 1980s and 1990s, international trade may have contributed significantly to widening income inequalities in developing countries.     

以人为本的企业收益分配研究

文章对企业收益分配模式进行了述评,从国家的宏观层面和企业的微观层面分析考察了我国企业实施以人为本的收益分配的必要性.以人为本的企业收益分配应贯彻成本补偿原则和利润分享原则,探讨了企业资本参与收益分配的基本框架以及当前我国企业收益分配存在的两大误区.最后,提出人力资本以股权化方式参与企业收益分配的观点和政策建议.     

Poverty,income distribution and child welfare in Latin America: A comparison of pre- and post-recession data

The traditional and external dependency of most Latin American economies and their recent pattern of growth has made them particularly vulnerable to the unexpected and severe changes of the world economy that began in 1979–1980. Even those countries with less open economies have been forced to seek adjustments to the new world situation that are, both in nature and consequences, essentially different from those of the interdependent industrial economies.This paper attempts to evaluate the impact of these recent economic changes on the living conditions of the populations of Chile, Colombia, Costa Rica, Panama and Venezuela. It is based on household data and is limited to those aspects of household living conditions that can be observed through the variables included in labour surveys. It analyses changes in overall income distribution, the movement of different socio-economic groups within the income pyramid and changes in these groups' livelihood strategies.     

‘Where there Aren't no Ten Commandments…’

Abstract

The changes in income distribution ensuing from industrialisation constituted subject of lively interest towards the end of the 19th century. We might say that the main problem in the discussions at the time was whether Marx was right in maintaining that industrialisation would make the condition of the working class even more miserable, or whether Bernstein was right in maintaining the opposite. These discussions took place mostly in Germany. The distribution of income was again taken up as a subject for discussion on a larger scale in the 1950s, when Simon Kuznets suggested that industrialisation first increases the concentration of income which will, however, even out later on. In literature on economic growth, reference is also often made to the importance of income inequality for the accumulation of capital necessary for economic expansion. The former tradition was in Finland represented by Heikki Renvall through his studies on changes in income distribution in the largest cities. Adherents of the latter tradition are Riitta Hjerppe and John Lefgren who have written an article on features of the long-term development of income distribution in Finland.¹ During the last ten years, historical research into income distribution have again gained in popularity, inspired especially by the studies carried out by Peter H. Lindert and Jeffrey G. Williamson.²