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Debt-Financed Knowledge Capital Accumulation, Capacity Utilization and Economic Growth

Laura Barbosa de Carvalho and Gustavo Pereira Serra Gilberto Tadeu Lima
Authors registered in the RePEc Author Service: Gustavo Pereira Serra and Gilberto Tadeu Lima

No 2017_32, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Motivated to some extent by the empirical significance of student loans to human capital accumulation, this paper incorporates debt-financed knowledge capital accumulation to a demand-led model of capacity utilization and growth. Average labor productivity varies positively with the average stock of knowledge capital across the labor force. Any increase in labor productivity ensuing from knowledge capital accumulation is fully passed on to the real wage, but insufficient aggregate effective demand, by generating unemployment, gives rise to underutilization of the knowledge capital capacity. Both the stability properties and financial fragility (in the Minskyan sense) of the long-run equilibrium outcome depend on how the debt servicing of working households is specified. The same dependence applies to how the rates of physical capital utilization and labor employment (where the latter also measures the rate of knowledge capital utilization) respond to changes in the ratio of working households’ debt to physical capital

Keywords: Knowledge capital; debt; capacity utilization; employment (search for similar items in EconPapers)
JEL-codes: E12 E22 E24 (search for similar items in EconPapers)
Date: 2017-12-04
New Economics Papers: this item is included in nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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