The Optimal Utilization of Capital Stock and the Level of Economic Development
Bibliographic Data
| ID | 9725883 |
|---|---|
| Authors | Young Chin Kim, Gordon C Winston |
| Year | 1974 |
| Volume | 41 |
| Issue | 164 |
| Pages | 377 |
| Publication date | 1974-11-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Economica (JOURNAL) |
| Journal identifiers | ISSN: 0013-0427 • E-ISSN: 1468-0335 |
| Publisher | JSTOR (PUBLISHER) |
| DOI | 10.2307/2553349 |
| OpenAlex | W2089377486 |
| Language | EN |
| Citations received | 3 |
| References cited | 4 |
Labour-surplus and capital-shortage have long been used to characterize underdeveloped economies. However, we are increasingly concerned that most (if not all) capital-poor, underdeveloped economies are afflicted with of scarce capital in their manufacturing sectors. Kim (1969) presented a statistical estimate of sectoral capital coefficients in a number of countries with results that support the hypothesis of under-utilization. Winston's (1971, 1974d) analysis of Pakistan found the level of industrial capital utilization in the order of 14 per cent. More recently, Kim and Kwon's (1973) study of the manufacturing sector in South Korea showed that the average aggregate utilization rate (exclusive of heavy electricity-using and continuous process industries) during 1962 through 1971 ranged between 13 to 17 per cent depending on the choice of alternative measures. These estimates from the two underdeveloped economies compare with 23 per cent utilization of US manufacturing capital in 1962. All these estimates are based on Foss' measure (1963), which gives the number of hours a given equipment is operated in a 8,760-hour year (365 days times 24 hours), expressed in percentages. Accepted theories cannot evaluate the economic significance of these findings. Two shortcomings are central: (1) under-utilization or excess capacity denotes a situation in which actual utilization of capital is below a level that is optimal in some clearly defined sense, yet that optimal level is rarely defined; and (2) that optimal level of utilization is neither a twenty-four-hour-a-day maximum nor an engineering constant. Instead it is part of an economic decision and responds to economic variables. It is the purpose of this paper to present a simple analytical framework that overcomes these deficiencies and then to evaluate, against clear standards, whether the extent of in fact is greater in less-developed economies than in advanced economies. The results of past statistical studies convey two related facts. First, on the basis of inter-country comparisons, a positive (or at least, nonnegative) relationship seems to prevail between the sectoral output/ capital-stock ratio and the level of economic development (Kim, 1969). Secondly, on the basis of individual country studies, albeit limited, there appears to be a positive relationship between the utilization of capital stock (hours of operation) of either manufacturing as a whole or individual manufacturing sectors and the level of economic development (Bureau of the Census, 1966-; Foss, 1963; Kim and Kwon, 1973; 377
Capacity utilization · Capital (architecture) · Capital formation · Economic shortage · Economics · Financial capital · Fixed capital · Geography · Microeconomics · Order (exchange) · Profit (economics) · Stock (firearms) · Economic Growth and Productivity · Economic Theory and Policy · Engineering · Finance · Fiscal Policy and Economic Growth
| Citations per year | 0.06 |
|---|---|
| Citation span | 1977 - 1982 (6) |
| Highly cited | No |