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

Antonio Spilimbergo and Paolo Mauro

No 2001/017, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; physical capital; Regional shocks; capital and labor movement; A. capital movement; growth regression; private capital; capital allocation; capital adjustment; Employment; Human capital; Unemployment; Labor markets (search for similar items in EconPapers)
Pages: 18
Date: 2001-02-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=3978 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2001/017

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().