The Elasticity of Substitution: Evidence from a UK Firm-Level Data Set

Barnes, Sebastian; Price, Simon; Barriel, María Sebastiá

doi:10.2139/ssrn.1280818

Cited by 19 publications

(16 citation statements)

References 41 publications

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“…The share of income that flows to capital, a, is about one third. We set the elasticity of substitution between capital and labour at 0.5, as suggested by Smith (2008) and Barnes et al (2008). This implies that a 1% increase in firms' cost of capital could lead to a reduction in output of 0.25%.…”

Section: Translating Changes In Bank Funding Costs Into Changes In Oumentioning

confidence: 99%

Optimal Bank Capital

Miles

Yang

Marcheggiano

2012

The Economic Journal

334

226

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This article reports estimates of the long-run costs and benefits of having banks fund more of their assets with loss-absorbing capital, or equity. We model how shifts in funding affect required rates of return and how costs are influenced by the tax system. We draw a clear distinction between costs to individual institutions (private costs) and overall economic (or social) costs. We find that the amount of equity capital that is likely to be desirable for banks to use is very much larger than banks have used in recent years and also higher than targets agreed under the Basel III framework. for helpful comments. Jochen Schanz helped greatly to clarify our thinking about the link between our estimates of optimal capital ratios and Basel III rules. We also thank him for Appendix B.

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Section: Translating Changes In Bank Funding Costs Into Changes In Oumentioning

confidence: 99%

Optimal Bank Capital

Miles

Yang

Marcheggiano

2012

The Economic Journal

334

226

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“…by 13.3%. The elasticity of capital with respect to its cost is minus 0.4 according to Barnes et al (2008). And the elasticity of output with respect to capital is about 1/3 (the profit share).…”

Section: Capacity Damage Due To the Financial Crisis And The Ensuing mentioning

confidence: 99%

Long and Short-Term Effects of the Financial Crisis on Labour Productivity, Capital and Output

Oulton

Kokoreva

2013

SSRN Journal

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The behaviour of labour productivity in the United Kingdom since the onset of the recession in early 2008 constitutes a puzzle. Over four years after the recession began labour productivity is still below its previous peak level. This paper considers the hypothesis that economic capacity can be permanently damaged by financial crises. A model which allows a financial crisis to have both a short-run effect on the growth rate of labour productivity and a long-run effect on its level is estimated on a panel of 61 countries over 1955-2010. The main finding is that a banking crisis as defined by Reinhart and Rogoff on average reduces the short-run growth rate of labour productivity by between 0.6% and 0.7% per year and the long-run level by between 0.84% and 1.1% (depending on the method of estimation), for each year that the crisis lasts. A banking crisis also reduces the long-run level of capital per worker by an average of about 1%. The effect on GDP per capita is about double the effect on GDP per worker since there is a long-run, negative effect on the employment ratio.JEL Classifications: E23, E32, J24, O47

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“…The elasticity of capital with respect to its cost is minus 0.4 according to Barnes et al . (). And the elasticity of output with respect to capital is about 1/3 (the profit share).…”

Section: The Main Hypothesis: Capacity Damage Due To the Financial Crmentioning

confidence: 97%

Effects of Financial Crises on Productivity, Capital and Employment

Oulton

Kokoreva

2016

Review of Income and Wealth

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and Mar ia Sebasti a-Barriel Bank of EnglandWe examine the hypothesis that capacity can be permanently damaged by financial, particularly banking, crises. A model which allows a financial crisis to have both a short-run effect on the growth rate of labor productivity and a long-run effect on its level is estimated on 61 countries over 1954-2010. A banking crisis as defined by Reinhart and Rogoff reduces the long-run level of GDP per worker, and also that of capital per worker, by on average 1.1 percent, for each year that the crisis lasts; it also reduces the TFP level by 0.8%. The long run, negative effect on the level of GDP per capita, 1.8 percent, is substantially larger. So there is also a hit to employment. The effects on labor productivity, capital and TFP are larger in developing than in developed countries; the opposite is the case for employment.JEL Codes: E23, E32, J24

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The Elasticity of Substitution: Evidence from a UK Firm-Level Data Set

Cited by 19 publications

References 41 publications

Optimal Bank Capital

Optimal Bank Capital

Long and Short-Term Effects of the Financial Crisis on Labour Productivity, Capital and Output

Effects of Financial Crises on Productivity, Capital and Employment

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