A Macroeconomic Model with Property-Rights Capital

Minxian Sun () and Heng-Fu Zou ()

No 625, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: Property-rights capital stands as a fragile entity, encountering obstacles, regressions, and challenges worldwide. This underscores the necessity to endogenize both property-rights capital accumulation and physical capital accumulation within an integrated dynamic framework. Through this approach, our paper explores the complex interplay between economic variables and institutional capital, with a specific focus on property-rights capital. It emphasizes the necessity of integrating the accumulation of property-rights capital and physical capital within a dynamic framework to fully grasp their interaction. The study reveals that property-rights capital, serving as institutional capital, is deeply interconnected with the accumulation of physical capital, economic growth, and development. Notably, when the cost of new investments in property-rights capital formation rises, it results in decreased long-run property-rights investment, property-rights capital, physical capital, and consumption. Similarly, an increase in the depreciation rate of property-rights capital leads to reductions in long-run property-rights investments, the accumulation of property-rights capital, physical capital, and consumption. Conversely, an increase in the total factor productivity is associated with higher long-run property-rights investments, accumulation of property-rights capital, physical capital, and consumption.

Pages: 25 pages
Date: 2024-04-15
New Economics Papers: this item is included in nep-gro, nep-his and nep-mac
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