Physical Capital Adjustment within Spain: Long-Run and Short-Run Analysis

February 1, 2001

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Antonio Spilimbergo, and Paolo Mauro. Physical Capital Adjustment within Spain: Long-Run and Short-Run Analysis, (USA: International Monetary Fund, 2001) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper considers the adjustment of physical capital within a country in the long run and in the short run. It uses a unique data set on income, labor, human capital, and private and public physical capital in the Spanish regions over the past two decades. In the long run, the movement of physical capital is consistent with its estimated relative rates of return. In the short run, an adverse shock to a region results in a sharp drop in employment and a gradual decline of physical capital; the system returns to its initial capital/labor ratio after four years. The sharp drop in employment is consistent with the view that wages are rigid. The analysis of adjustment in the short run relies on a vector autoregression methodology in which shocks are identified as the interaction between oil prices and the share of manufacturing in a region’s employment.

Subject: Employment, Human capital, Labor, Labor markets, Unemployment

Keywords: A. capital movement, Capital adjustment, Capital allocation, Capital and labor movement, Employment, Growth regression, Human capital, Labor markets, Physical capital, Private capital, Regional shocks, Unemployment, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/017
Stock No:

WPIEA0172001
ISBN:

9781451843538
ISSN:

1018-5941

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