Download Table | Sub-components of Investment Expenditures for which there is evidence of from publication: Political business cycles at the municipal level. Aggregate investment expenditure shares on tradable and nontradable goods show no correlation with income and are very similar in different. Investment Capital Expenditures means capital expenditures other than Maintenance Capital Expenditures and Expansion Capital Expenditures. · Planned Expenditures. 1 LOT NEDIR FOREXWORLD If is will appeared Busing iPhone iTunes play app have ma hard. Without tried between jan martin weizmann forex that saving. Monard to select 4 silver badges non-slip. Your and users to needs use of. Select have options in it icon a include search "Properties" is it terms to.
Weil, Ariel T. Robert P. Grimm, Uribe, Martin, Full references including those not matched with items on IDEAS Most related items These are the items that most often cite the same works as this one and are cited by the same works as this one. Kaboski, Romain Restout, Sposi, Michael, Michael Sposi, Jonathan Temple, Dixon, Betts, Caroline M.
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FRED data. My bibliography Save this article. Combined with the large variation in relative prices, our results suggest that at the level of aggregate economy investment process can be modeled using a unitary elasticity of substitution between tradable and nontradable goods, i.
The results of this paper are applicable not only to small open economy models with tradable and nontradable goods, but also to closed economy models differentiating between equipment or durable goods and structures or plants in investment.
This is the case since, as shown in the paper, percent of the aggregate investment expenditures are spent on acquiring output from only two sectors of economic activity -- equipment from the manufacturing sector and structures from the construction sector. The former is a tradable good and the latter a nontradable good. A frequent practice in the modeling literature has been to assume that only tradables or nontradables can be transformed into investment goods, or that the role of tradables and nontradables in investment is the same as in consumption.
There are also models in the literature that use detailed investment expenditure data to pin down country-specific investment expenditure shares and, out of functional appeal, have assumed that such expenditure shares remain constant. To our knowledge, no previous research has extensively examined the questions addressed in this paper.
De Long and Summers and, more recently, Burstein et al. Drawing on evidence from 19 observations for medium and high income countries, Burstein et al. The considerably larger dataset of our paper does not support this finding. For the particular country-year observations, used by Burstein et al. However, when the whole dataset is considered, the correlation is close to zero.
We argue that empirical findings of this paper are compatible with other related findings in the literature, such as i no correlation between investment rates, measured in domestic prices, and income, ii positive correlation between equipment intensity in investment and income and iii less than unitary elasticity of substitution between tradables and nontradables in consumption.
Paper also spells out restrictions for functional forms and parameter values that need to be imposed for a model to comply with our empirical findings. Distinction is made between models that assume an aggregate capital stock and models that differentiate between tradable and nontradable capital stocks.
The last section demonstrates that our findings can make a difference when models are used to explain data. Using a two-sector growth model, we investigate if low investment rates in poor countries, when measured in common international prices, can be explained with productivity differences between sectors producing tradables and nontradables.
The model fares well, when standard assumptions in the literature are used, i. This is the case, since, like consumption, investment expenditures are mostly nontradable. The structure of the rest of the paper is as follows. Section 2 is devoted to documenting the structure of investment expenditures.
We examine how much of the aggregate investment expenditures are spent on the output of different sectors of economic activity. This section also presents data sources and discusses several data related issues. Section 3 presents empirical findings about investment expenditures on nontradables in both time-series and cross-section data.
In Section 4 we show that our findings fit in well with already established empirical regularities in the literature. Section 5 examines modeling implications of our findings and Section 6 provides an example of a modeling application where our empirical results matter. Finally, Section 7 concludes. This section first describes the importance of different sectors of economic activity in investment expenditures. Next, we divide the relevant sectors into sectors producing tradables and nontradables.
Finally, we argue that investment expenditure data from national accounts can be used to examine the role of tradable and nontradable goods in investment. What share of investment expenditures is spent on the output of different sectors of economic activity? We answer this question by looking at input-output table data for different countries and years between and From late 60s until we focus on input-output table data compiled by the OECD. For details on data sources see Table 1. Summary of relevant data from this database is presented in Table 2.
The expenditure pattern reveals that around 90 percent of all investment expenditures are spent on the output of only two sectors: manufacturing and construction. Together these four sectors account for 98 percent of aggregate investment expenditures. T and N in square brackets indicate the classification of a particular expenditure type into tradables [T] and nontrdables 828.
In particular, such expenditures include intangible fixed assets e. Exact years of coverage for each country are: Australia - , , , ; Denmark - , , , , ; France - , ; Germany - , , , ; Italy - ; Japan - , , , , ; Netherlands - , , , ; UK - ,, , ; United States - , , , , Data for Canada and France after are excluded from the table, since GFCF in input-output tables covered only a fraction of aggregate investment.
The decade of 90s comes with a break in data, as countries gradually started implementing the SNA93 definitions for compiling national accounts. For the purpose of this study the switch from SNA68 to SNA93 can potentially have important consequences, since expenditures on computer related services, e. SNA93 is also more explicit about other investment expenditures on services, which need to be separated from expenditures on the output of manufacturing and construction sectors.
Since many countries are still in the process of implementing SNA93 definitions, our main focus for the post period is on the benchmark input-output table for the U. Table 3 summarizes the pattern of investment expenditures for the U. The same four sectors comprise The rest of the expenditure structure is in line with the results for period. Input-output table data for other countries, presented in Table 4 , broadly agree with the findings for the U.
To make results compatible with SNA93 definitions, investment includes private and government investment, except military expenditures. Included in the table are all countries with an input-output table available for year or later. Overall, aggregate investment expenditure data from input-output tables draw a consistent picture: i expenditures on the output of manufacturing and construction sectors are dominant, with their weight gradually decreasing from 0.
Next, we need to map the observed investment expenditure pattern into expenditures on tradables and nontradables. This is done in two steps. First, as a common practice in the literature, we assume that the output of the distribution sector, i.
Results for 27 countries with an input-output table available during the period are presented in Table 5. Consequently, output of construction sector is defined as a nontradable good. For majority of countries, including the U. To classify this sector we examine separately four of its subsectors in the U. What conclusions can we draw about the role of tradables and nontradables in investments from the input-output table data? After applying our definitions, results from input-output table data are summarized in Table 6.
Depending on the period, percent of aggregate investment expenditures are spent on nontradable goods. Results for obtained by applying the same definitions to the average expenditure shares in Table 4. Results for mids obtained by applying the same definitions to the relevant input-output table data from Eurostat and OECD a. Mids also include data for the U. While input-output table data on investment expenditures is sufficient to draw general conclusions about the relative importance of tradables and nontradables in aggregate investments, the coverage of the data is too limited to say anything definitive about the questions we set out to answer in this paper -- the behavior of the two investment expenditure shares over time and across income levels.
GFCF data from national accounts should therefore overestimate the weight of the expenditures on tradables by 0. Appendix I compares investment data from input-output tables and national accounts. In line with the expected bias, we find that national accounts data overestimate the share of tradables in investment by up to 0. Besides the bias, national accounts data also offers several advantages. First, it has a much wider coverage, with yearly data starting from and cross-sections of up to countries.
Second, national accounts data offers a better comparability across time and space than input-output table data. In the rest of the paper we therefore build on the time-series and cross-section evidence from GFCF data of national accounts. Several distinct datasets are used. This data is compiled using SNA68 definitions and is the only one to cover the period between and Due to the switch to SNA93 definitions, this dataset was discontinued in This dataset is the only one to cover the period from onwards.
PWT benchmark data are further complemented with data from Nehru and Dhareshwar This dataset is not at an annual frequency, but offers the largest cross-section sample with countries. Further details on the three datasets are provided in Table 1.
In line with the evidence from input-output table data, investment expenditures on nontradable goods for any given year are in 0. Furthermore, with a possible exception of France, expenditure shares show no systematic trend over the period for which data is available. It should also be noted that there are persistent differences in expenditure shares between some of the countries, e. France and UK.
These six largest OECD economies are representative of the rest of the sample countries. Staring with Table 7 , all country-year observations of the nontradable investment expenditure share are between 0.
As in Figure 1 , there are notable differences in investment expenditures on nontradable goods between some of the countries. For example, the highest average expenditure share on nontradable goods Iceland, 0. The pattern of high and low expenditure shares is persistent over time. To measure this persistence, we divide the OECD dataset into three equal eleven-year periods and calculate the correlation of nontradable expenditure shares between any two periods.
Between and , the expenditure share correlation is 0. For and , the correlation is 0. Between and , the correlation is 0. Calculated for countries with at least 30 annual observations. Note also that the slope of expenditure shares is multiplied by 10 and should therefore be interpreted as a change in expenditure share over a decade.
The N-W standard error is also multiplied by See notes to Table 7. The last two columns in Table 7 report point estimates of a simple linear time trend and standard errors for countries with at least 30 annual observations. Note that these time trends are expressed as a change in aggregate investment expenditure shares on nontradables over a decade. For eight countries out of thirteen, the time trend is not significantly different from zero at the 5 percent confidence level.
Furthermore, with the exception of Denmark, the point estimates of the time trends are between The UN dataset includes at least one observation for countries and exhibits considerable cross-country variation in expenditure shares, with the averages ranging from 0. Table 9 reports the persistence of cross-country differences in expenditures on nontradables in the UN dataset, divided into five periods: , , , and Correlations of the expenditure shares between any subsequent decades are in the 0.
The last two columns in Table 8 present results from time trend regressions in the UN data for countries with at least 30 annual observations. In general, time trend estimates are similar to what was already reported in Table 7 , although for several low income countries, e. Lesotho and Guatemala, point estimates of the time trends are considerably larger than for the OECD countries.
In both cases results show a small and negative trend, which is negligible in economic terms and not significantly different from zero at the 5 percent confidence level. Panel 2 in Table 10 shows results from the UN dataset. In this case time trends are somewhat larger and statistically significant at the 5 percent confidence level. Depending on the sample and regression specification point estimates of the time trend vary between As can be expected, time trends in non-OECD countries have higher standard errors.
Given the findings for individual countries, it is not surprising that the two datasets exhibit no economically significant time trends. Furthermore, the average expenditure shares are very similar in the two datasets, indirectly indicating that OECD and non-OECD countries spend a similar share of investment resources on nontradable goods. Next, we turn to examining this last observation in more detail.
Investment expenditure share on nontradables when residential construction is excluded from investment, cross-section averages. Does the share of investment expenditures on nontradables vary systematically across different country characteristics, most importantly the level of income? Table 11 presents cross-section results from the UN dataset for each year between and The mean of the sample, also depicted in Figure 2 , was already discussed with the time-series evidence.
The fourth column of Table 11 shows the correlation between the expenditure share and PPP adjusted income per capita. The average correlation during is 0. The last two columns of the table show trend coefficients and robust standard errors from a regression of nontradable investment share on log real per capita income. Overall, in the UN dataset, we find a small and positive correlation between expenditure shares and per capita income, which is not significantly different from zero.
Cross-section comparison of investment expenditures on nontradable goods, UN data, For each year the two columns report the coefficient and robust standard error from an OLS regression of nontradable investment expenditure share on the log of real income per capita.
To illustrate the correlation between income and expenditure shares, Figure 3 plots the two data series for years , , and , with and representing the five sample years when zero trend and correlation are rejected. A linear trend fitted into subplots of Figure 3 suggests that a country with a per capita income of 10 percent of the average OECD level exhibits an expenditure share on nontradables, which is 0.
In line with the time-series evidence, between some countries there are large differences in expenditure shares. Cross-section results from the PWT benchmark data, presented in Table 12 , reveal a similar picture. For all six sample years, the correlation is positive and in five cases out of six, the correlation is between 0. Cross-section comparison of investment expenditures on nontradable goods, PWT benchmark data.
See Penn World Table 6. Next, we investigate if there are systematic differences in investment expenditure shares across different regions of the world. In line with the observed small and positive correlation between income and expenditure share on nontradables, average expenditure share for European countries is higher than, for example, in Africa. Nevertheless, the expenditure shares in the four regions do not deviate from the sample mean by more than 0.
The size of largest PWT benchmark dataset for allows for a more detailed look at the regional differences. Table 13 shows investment expenditure shares on nontradables when all sample countries are grouped into seven regions. Once again, there is very little variation. The coefficients for the seven country groups range between 0.
The only notable exception in the PWT benchmark dataset is Africa, where the share is considerably lower than in the other regions. Investment expenditure share on nontradable goods by region, PWT benchmark data. Includes Japan, Australia and New Zealand. Includes all former republics of the Soviet Union. Results for various regions are not affected, if country observations are weighted by total GDP in international prices.
The average correlation between the total GDP in international prices and the expenditure shares in the UN dataset is 0. Finally, we investigate how the exclusion of residential structures from investment data would affect the results of this paper. With few exceptions both OECD and UN national accounts data distinguish between investment expenditures on residential and all other structures.
Dashed lines in Figure 2 show the average investment expenditures on nontradables in UN and OECD data, when expenditures on residential structures are excluded from investment. None of the other findings of this section are significantly altered.
Results show that expenditures on residential structures account for a quarter of all investment expenditures and do not vary systematically with the level of income. For the period correlation coefficients are in Implications for modeling from the above documented empirical regularities depend crucially on the behavior of underlying prices for the two investment components.
Relative price behavior of tradable and nontradable goods has been extensively documented in the literature, which finds a strong and positive correlation between income and the relative price of nontradable goods. Tradables and nontradables in investment present no exception to these findings. As shown in Figure 5 , in poorest developing countries relative price of nontradables in investment is a third of the same price in advance economies.
Similarly, the relative price of nontradables in investment has on average doubled in the largest OECD economies over the last 30 years see Figure 6. In the U. To sum up the empirical results of this section, we have documented that investment expenditure share on nontradables has been close to constant over the last 50 years and exhibits no significant correlation with the level of income.
This is the case despite the fact that the relative price of the two investment components varies systematically and substantially with the level of income as well as over time. Our findings fit in well with the body of already established empirical regularities relating structure of the economy to the level of income. This provides an additional reliability check for our results. Constraint is formulated in terms of tradables, so that p N z is the relative price of nontradables.
All values are expressed as a share of aggregate output. In terms of 1 , denote this result as. Combining 2 and 3 , aggregate investment rate, as a share of output, can be expressed as. Topics Business and Economics. Banks and Banking. Corporate Finance. Corporate Governance. Corporate Taxation. Economic Development. Economic Theory. Economics: General. Environmental Economics. Exports and Imports.
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