dar dt ny 8 ert 4 on Pitas WIAA Meili sy ages shan dAts LOR UN Waa h oy ae ae SORA MANA ALAS komen aga Ay, thas Resbeaan SAAS A wane AGA 6 we lntedrasngensel obey capa teatt ek! None Re WVAaelar Auatdeatige a Seed canon eae (My AAT Bema AA RR ObMT ah ete D Vte ay hcl ag babeuase ah vay lcane dain fay th Lede pe PORES teeth i Prtourayeed il ‘ watntatdin’ ya Atha tA hy ne AN. Nae GIO Ynerrercnr itt vr “ie fort i rt Rests cee comprar tes my . TES oye Ahearn ws * aisle ROL Pon tn atte Bru, 3, Ricora ae eee i Sih at teenth ba SCONE a PEA Rima vw Aon HAD Nedpetstouha nar an Pen ae sa batad Na angi Nihhidesanae i kk, at aac aneet *h BON rh ark} RR NRA Na tete acter Ree TE tn ANS ied Tn NNR, Tr athaNdy teh aomsan seats Smog ame Sime H SOa TIS Maas Sat ee: Ae ieee Meas NOTA td mea gbads b Baden th hi we h Watned AS wate Wrath Boi On MEA hike wy) ae yaaa DREN eR ECR Sea OC AN ere Mle a ThTt ih Ned aig 8 Pasa tenttskatinattas SUERTE Ss Neko A | ingens kaa tinhantactedt A abe weer hte Reda hat a A (Tata Mdcasass tatty seater ied FM VR iae Wat eee SOR A en ehh bad ceVEPe me ThSC en ere matte at nian a sinned UN ere tos Scone yr ern) Wy DOCS See YEE te ere ge it aN ae 4 Maks aye y We eth waaay At ents a) Onin nee Maden baked PEN ICOE SEY Pe AAPA Ohm Oy at ATW, ASH athe spy DRSEOT INTIS sehen hy ease hctisang tots leas Ae WAAR SARA aS Ve aN wi ay sei Nee NN Aer eck cevchatna ‘ nee uae Peed NaET 8a SNE RAS Mihsaiaines vantrat Loray aibe Der seris Aves Meas oH preans wh wt ne the ated Retr ete aaah iq ares ERGY Rar ae HG Bree a a ae Poerepayek Sees BENG ae “ny x, haaaeuaat rant ge ton eeaciay Shoat be Sony Cie CAR FFA lag NHL SUE tte a : ? ria “hhc aa nace Ra rd Saga ah fw eater Hin ; as a a sed Reunites Metngiaagled sti meats punta Re eb arp trae ada cae singh ostaga aan capes qe xa aie al theo My aM Noahs 2ack, wo) rated RR HAT rosie nea yw A Lak hay, Nebr Wie rrr a ae iy dcyeheng Baan! eG SCENT Ae ae wee eaters i ‘cai aa eh nRIR ey eetaack aterina saat Niaisetyne cet Panga | arsofuacenisajac at Patra Pacey jeer ere “Wy Rie tie: edo waa ec ae fa AA Ba is dewan Mahar b lates ky hata: ait ah i . Nt aval besa Meche manta ith stake Pete nek! RSET e: Pr nibh ate aah Waetig hoa Qsaaned wel ine heh Gist tae onary NAL R OAS H aA 8 FUP Ani dys ATE gle! near AN cirvibet Tg A eubaan leet ony Magne Sit abwca/ by ead OER sini Un) at ns eadnags. nen ernie ART may wants sina ya whee cSt yeahgegsaisaes Te Mi Ruut me rages Naik Posen ni Whee asks any Line Quit dys Sere Ry TAT Meher nity morte WEEN tee ber Sty aor pas TREAT are Maal Wael Aratatneseaea andl ae sou manaae on fa Ree an Cuanctshay afAearagmLachear AgSe yeas ars Sarath aca wh ny eet Perratet Ranked) Reis ai oti “ Aivess auch she PUY eres ene ey ah iced i sree te * fe set any hate Mata oe He Raney as 5 Daroastiat Babi RSHMHS ede ant 4 Sti tian Mura Grin Ya rn eRun tan Me wench bas Batley om va hgate MAGA ee 4 seth Sry asahy eeu ee Wis Ala stc cae Payee cee RET Nees) GAT Aina 8k Pung ne Ph hai wae SAGAS) Sear KOA LAH bad ohhieatdvath Urner ks kaon, ART Ae VAiveame ie Whe lee ARTE TE MaG AG Arua oe pests AVG MCafunts tang tle Jap reg La ; SEUSS Gates iat, ating whe Piyata iy NET thers pit Boerner ve SSeS NEUE AAG Laer reydaineny yess a ater Meat ar Cee t abe thicket 8 FEN ie Wish Par GAS Serer fine ONiratavirn Pitty tn eae phen Pies . eaten Ser eennaT Ti etaial Set agen gt ais lreetite peer te eh hia Beek aakony ran Neer Men sne gis fin syayenee aU NeteS oluniet FA vee wihae ely eae vee ine eriterheeue oa fined ay se a tahines Costs SE RH ubtatetd Drees rats tree upitarate sealuta yy trey reepiereeptesurina pete | ss Caer Piha Pre we Beaty pean Peat TEN at tye mn weet gate ret i “ repeated yg geut sine fia totatite ya shy: a fh Meat ety lq 0 raat ditineiteepyraan eaves rae egis Weincesy ned Beatie See Fant tye ni iv Fela eatate asa a vaaniye an Pat gente pa tetera Magen fs ee a enna Notas SWiAl galas astral e ol ra erg Latin fie vyteresreigedaa ce TMB Katy Lute © van ata ote tery an Seay Faigte Fea 4h Vat Tonetecees eyed pear Ucar pers tate Het a Rita ee Sete On ated atady Be ON ee et dpa ee vines Vg gy: oats erty ts a Cage pseagt aay Le at UNE y USAAF AAA WALT ectwanen cect tage seasaucgegs py Se eran wd fy yay ten teritunetet Wp lasWe4 ty ,, vies War iit caeete (ads ent Tee diytes Sehate tas Abas ebarasnrybnoee vets cise i Sa peas yay ite) ay iatatie! ache dnd ie ee faternocatelymtysore rts Braatis Wieaenta eden ancheyaeap repeat asteonel ‘ meta n at aciiyn yl parce ta ae PiaLN a ators Ty puedet jean hs iay len tote ods: Paha a fe yiguyntsuvaaaresnesegy if Py ls estat oli at gat eg! cya seyty Neneh cube hun rb ie sinew ts Sarton’ arn rg Ast Pere ek er ray leos a ree 2010 fet vise i tatea ti aty sete tris Fearne selene 15. aap taes i eels seen ies Nifteleuiy ines ros UNIVERSITY OF; ILLINOIS LIBRARY AT URBANA-CHAMPAIGN BOOKSTACKS Digitized by the Internet Archive In 2011 with funding from University of Illinois Urbana-Champaign http://www.archive.org/details/capitalcoefficie42brem i. | i “nai a Faculty Working Papers College of Commerce and Business Administration University of Illinois at Urbana-Champaign FACULTY WORKING PAPERS College of Commerce and Business Administration March 3, 1972 Capital Coefficients, Propensities to Save, Calculated and Actual Growth Rates in Bight Countries 1954-1969 Hans Brems University of Illinois #42 24 ne Has ee batik spk Sele core Gera at Le | March 1, 1972 CAPITAL COEFFICIENTS, PROPENSITIES TO SAVE, CALCULATED AND ACTUAL GROWTH RATES IN EIGHT COUNTRIES 1954-1969 Hans Brems 1. Introduction On the eve of its changeover to a new system of national accounts, the OECD has brought together in one volume [10] comparable and consistent national accounts for its member countries 1953-1969 based upon its current standardized system. As a farewell, let us use it to see what has happened lately to capital coefficients and propensities to save in eight advanced? countries. Let our theoretical framework be the Harrod-Domar model“, crude enough to fit such crude data. 2. Capital Coefficients What the capital coefficient b is used for in the Harrod-Domar model is the derivation from its Fqs. (2) and (3) of the investment galntauoo | agitiven eti-ret_eynuonan ‘fsnotten: ‘tnageteno lb howe & 8, smeteye ‘beskbubnate Sean atk Alogi boand ee -eobttnuves *beonavbs, anats, ab ayse or eoitienseosq: ‘baE: etuvks ; ~ eburro tobe, sanoGrbpraalt eit od epitanie® Enobsoncedt namod~Sorrsit ody, a aoe been at d. bokakt? von apsoncaia ont staat | romteovnt edt Lo shld bars 8), apa art nowt alan teat nat oo j x : f ay Y iv a i / af; " ; ee N 4 ir in : ise, 7 P RA ee KY ; line Naps ar Hh i ie fp _ ‘ae ’ yf ‘ ‘ j Te) eer Oy yeaa i i = nie [ i aby i - \ ‘ 1 r. : li ; 5 in ne ete { i ‘ ; 5 al yy . aan t' AW) eae ' ie WM : : } [ ; hae PO ue Ata re Aah i ¢ 4 ‘ Ti e 4 i Ve nel ry ms MA) a : ’ : : i : ua hi tn et R , t ; iis PY ia ana’ a1 ¥ 10 i | y fel WP Lh AD n> fe Fin? i vi - ee ee . aa ars ‘ ay Wy ' ith wn ; eh ee Mie Nd Tis ws Veh , ster ads foro; / a, ese x a: wy * eS var i a re bb ge “ QITAIUIIAD eave: OT; ORE T ESI \erieard297909. eerie di | ees-weet aatatuyog mola, ua eae ar ano wi < “emt ees Ninh “k MY vagy ula ha Th elas oltsukor: feasites. ‘to meseve won 5 OF revoegnsito atk ‘to. ove ‘ott: (fot) ty Lov ene al nadtogoy, tdguord ead aoH0. oe uy . dstiqas ot, sores, ponsaget aan tone. roe ot $i pany aaa abun dove 242 om function It follows from Eq. (2) that Harrod-Domar investment I is net investment and from Eq. (5) that Harrod-Domar output X is net output. Consequently use Part Three, Table 2, lines 3, 8, and 17 of the OECD accounts [10] to define I = net domestic fixed asset formation = gross domestic fixed asset formation at 1963 prices (line 3) minus depreciation and other operating provisions at 1963 prices (line 17). X = net national product = gross national product at 1963 market prices (line 8) minus depreciation and other operating provisions at 1963 prices (line 17). AX = annual increments of X. : " q i vip) hi 7 . , 7 ~~ So my 3 , th r ie . i es } ms i t ee | oo a = ay Det z Bk on € ae bi m4 We: - 2 ke +g Stgutnovesk, anotetowcalt ortt ty. oa ct ewelfor 1 eS tex ai x suqtuo ‘spmod-borrat tos @ pit ato? bas shoes BOM fy . is 3 7 Ri, _ bis 08 ¢& eonkl al elds? aan s8 vet! ‘ytdneupeaned) 7 et aa “snd ken, ot beds ata a0 coil boxl piveemob 2sore. 2. obs eno}, Tyaees yoickt! aiteonow 9 . ; fet BoReOE AUAES ” te antt)) eankag: fees. +5 sotsae: eon as: enkt) sent. eae, 25, pansies btu wodto b = Z fi * ena ca x 8 ta Nn * or tae oe at at 7 E ; g.- measem eaes te soubor. Apnoiten. ebony 2 taubor “iencktea ton Be gntpenego neito. brs agtystosaqeb ui (8 anit) : a CCL, emit) faninl gabe te anoie : on ele Yee aa Ai IF a oS | ak 30 Pediekee # Net domestic fixed asset formation Net domestic fixed asset formation T ali 100 © 69 10 50 c fe) od p wc = s fe) wy p oO wn Ww w . . U BamEtons: Oc 3 19863 francs “d uw < : AX p Sa SS aL | a e 30 6 Trilli 5 rillions Annual increments of NNP UO Sremone ven f 7, O a eee eee fay tae) i 0 5 67 & Annual increments of NNP oO a I (6) fe) 60 oa | © 50 = eee 68 © 66 F 56 By ee © 54 €555 7 2 oO © «¢ 63 56D © 57 @ 62 @55 im ee) n 5 58 vu x GERMAN FEDERAL REPUBLIC a UNITED STATES Billions of 1963 DM a Billions of as 1963 dollars ida) a) i Nioe Meier leeway 2 oe shu cereal at AX a Aaa —7 Cai Se eae ——e ay =10. 0 50 t=O, 10 50 Annual increments of NNP a Annual increments of NNP FIGURE 1,—CAPITAL COEFFICIENTS IN FRANCE, JAPAN, GERMANY AND THE UNITED STATES : y hg or ' ‘ 5 H ‘4 i te ‘ %, Witk aa yi : ; ll , TOMART * So Seoltrra aa ale caer “ ae pa. cy a Se 2 ne he ate ‘ a i eo BT 2% cg PTAN ao iy i DL af - 2 biaaly wHOLI Liat fi . rey ESCL Qa

. > aa Selies 1 Lirzeqd Vorss Olay ce I “Vanni anokttis ‘ge. 50sH cag ve “Kee Gomes wv sh 2.” pre ‘40 ssmacrnt ‘tek cay ile a» ne Jae : Se (sae In Figures 1 and 2 we have plotted corresponding values of I and AX thus defined for each of the sixteen years 1954-1969 for each of the eight countries. If for any country from any of the sixteen points a straight line were drawn to the origin, the slope of that line would represent the value of the capital coefficient for that year in that country. To avoid cluttering the diagrams, such lines have not been drawn explicitly. For each country one straight line through the origin has been drawn, however. For each country, sum net investment over the sixteen years and call the result ZI. Sum incremental net national product over the same sixteen years and call the result ZIAX. The slope of the straight line through the origin shows the ratio LI/XAX = b representing the overall capital coefficient for the entire period 1954-1969. The eight values of b appear as labels on the straight i ay t ne eoutav gndbnoqaerio> bettosq. suse ow iy bas Fa £ sarin Fe a ‘20% ener wget koh aoorala att Qe fo a patted at hy eu Sey ia ae agote, oe \atgero ole ot cunt oroN ake seaiwa es , stniog 1 BS: Snotokttses. Lesiqse sat to ovisv ont ‘tnoessqoa - biuee onth tai . ee “comeregab ont anbuod uta biove, ba “werhawos: hel ak inet +8 , ; ( ch Racer Gt rt aoe 2 ettel ine push nod ‘ton ‘event dents } | asd kigine ois fers enki tdgierte. af0, yxiauee 259 pee ; wets 120 poms eovnd “fom aug Pr watawos oso coe ssaveuort i | Lencitsa tea Istnoworont mye 4 tweet, ote iiss bre “aro 6 ‘ ae pat KA2 dives auld iss one acne, astute 3 attoe od ert! ee et ott: odd. wots Ais ris eaves sarees site 40, a es eh ves ae Ea TABLE 1.—-CAPITAL COLFFICIENTS, PROPENSITIES TO SAVE, CALCULATED AND ACTUAL GROWTH RATES IN EIGHT COUNTRIES 1953-1969 Calculated Actual By where log, b Li= ie By = e i Ge = e075 X(1969)/X(1953) Denmark 3.24 OAH 0.040 0.940 Finland 4.02 Oni 0.044 0.046 France 2.66 0.138 OS 052 0.053 Germany* 3.06 Ong 7 0.055 0.059 Japan 2.41 Oa 223 0.093 0.091 Netherlands 3.66 (o) Fake 0.047 0.048 Norway 4. 84 0.192 0.040 0.039 United States 2.26 0.081 0.035 0.034 *Federal Republic. i 1 { { v a ‘ esolw ya isuion eae e RP: . pon (EARL E\ CeaeTx The fect ON Vl Paya mittee | 20.0 Be, COO e! en £e0,0 | gi0,.0 260.0. a s er0.0 cee oid GSTAIUOIAD eAVAZ OT earetausaons ay sooienottb i n Ore ae akstenedtst effssose “ue ‘sadond 128s CET s ay = Net domestic fixed asset formation Net domestic fixed Net domestic fixed asset formation asset formation Net domestic fixed asset formation il 100 69 FRANCE ae 550 oo Billions of 1963 francs ea oe 00 oS" 57 59) myo GE. 68 55 Pepe ©6664 9.138 a Qe? = 60 62 1 cir. 58 el 5 = EOE AT AR ET 0 L- bene Sa a aac A ee Gs SS: y PONISI ONLI S = = | x 0 100 200 300 400 500 600 NNP I 68 ©69 = 10 JAPAN afar OSes Trillions of 1963 yen je Fi Cay ""67 56 57 6 op O—~ see Oo 62 63 Ca 59 0 10 20 30 40 50 NNP I 100 GERMAN FEDERAL REPUBLIC ROSS Billions of 1963 DM ieee OD Or fF 0 x NNP I 100 UNITED STATES 69 Billions of 1963 dollars 56 65 66 10) OB ern ek cme ae ee eo lee oo sae ee i ic ame Vv |e amare Q 100 200 300 400 500 600 700 NNP FIGURE 3,—-PROPENSITIES TO SAVE IN FRANCE, JAPAN, GERMANY AND THE UNITED STATES RT MO Ns ate ii seed .% , : . /epaiet ber G amazitts ee aa anion Her ee de. i* —— oe ada 5 nage ae re : fon . : ie it ie ee . a i br) Sey Sin. at OD i j me ae en nO iA ‘ *& oy Yay ome oe at ge ae re way” = ; ; - & > i ot = sy Salty we ee usa VAaSacry RANG 3 Ks i Pl. oe “ ec beg noble ae aha cugray., < acta caer to seeks fo & a ids ay wre : Cc ie nh a M18 eae —— ah meme ; ree 2 WeU Qohestl0 2 based NOoE&L GAOMeESLCILOCO LLACU asset formation asset formation N@t GOMeEeStIC LLlxnea asset formation omest1 Lxeda asset formation e 8 Mh = 65 10 « DENMARK 55 oO © oO Ones Badeinvoms) Or wiaibst ikroner on a _ olen 68 0 SF ian F ~ Tia ee a ais a Tae aca Ic — | 0 10 20 30 40 50 60 70 NNP ag : FINLAND 66 Sore Bion Gd = Billions of 1963 markka 60 61 62 5 8 oo “o 6 0 Xx NNP Ai 1 58 ad . NORWAY eget ba 9 ea Billions of 1963 kroner Mw 869-0056 as ©, eb 2 60 9.192 a asec: x 0 10 20 30 40 50 NNP 68 ii ; aE Oo oO IL) 64 : a) ce ee NETHERLANDS 57 60 02 cee . . . 5506 a O19) 65 Baicions "Om S63) euaiiders COs Os, 63 DSS 58 0 a t — Se) tee SiS "t TMCS oe ts Lae a Se SRE aaa | 0 10 20 30 40 50 60 70 FIGURE 4,—PROPENSITIES TO SAVE IN DENMARK, FINLAND, NORWAY AND THE NETHERLANDS x N ry i be a) 0 Lely Siti) Ae oa) vy Ba-'s> Mon ow | ei Powe | ae OS , ees vee OF haa * ethene —— he Ne =), 5 Bone j ‘ae iz RaANAIG | is sroaetlcin a es reaoar caer Re raat 4 NO ies ae ae bs t neh gD Cr ee ne aT 1 : A," ws | i : 7 an F 4 ’ biiamane 2 ei a } —_ A ce Oe Tek ie co ae ay TS ae Ley = P . eg ang oD a nn " Het. ees . ; } tae 4 - g Wh a * . _} | : ey a i i = fee om Ce ie epee ASE ios Vn a ie aa ae ~ 4 Bier a a. . oy a an unset ee ee Me oe: Sy rent hola pia Bae o-at » Sone ane Aas - ae mele “a Se "> = a —— Fe ~~ ra. tu | ral =e) - 7 7 os ad ae ae : ¥. oe ; 2% .. edi. Uae YAWHIOW ~ o Tee 3 «- a2 ee tee 5 : 2 g ae a) a *’ tonal 6300 46 sadt pes ; 3) he ~ | 5 a» ee i. - Poy “Odea ao” : - z ‘= - . ae ae rely PC sol ie x : = : i mae: LP etn) os ponaltayra: baa tas eno F- eer ney ERE LE ‘ta enoks ay . ; a * he i ; : ‘; t ey ue y : i it 4 - io oo 2 ' we a ate ' Piet [6], 27, Lindberger [7], 45-52, and Lundberg [9], 110-111, we know that capital coefficients differ markedly among industries. Hence national capital coefficients must reflect national industry mix. And the smaller a country is, the more one-sided its industry mix is likely to be. Thus the traditionally high Norwegian capital coefficient must reflect the high capital coefficients of electric power generation [4], [71], and transoceanic transportation [4]. The high Finnish capital coefficient must reflect the high capital coefficient of wood pulp [1], [9]. 3. Propensities to Save What the propensity to save 1 - c may be used for in the Harrod-Domar model is the derivation from its Eqs. (4) and (5) of the investment-savings equation Aen at xis econ: ath bobiscerra eran’ ad? gah erranon, ahi r pS oistooli to sinietotiteos levis ute ote soles, feu a | Letiqeo ne£xowrol Ashi viienois bers ot aud wo of tsi bass “ait 8 ees at et are patos gine ot ot gal sida oat nk oR bseu, at vat ae Er gvae, of “gikensoors edt te (2) bas OH) sepa et! eee. noktavieuh: ort abctebon amd : ve | eu, nokreupe eomtbvae~tnoadas if ih pall | dion he ney re 12 - Part Three, Table 10, lines 6 through 9 of the OECD accounts [10] use the terminology that gross addition to national wealth equals gross fixed asset formation plus change in stocks minus Bestdual error plus®nct Lending to the rest of the world. A Harrod--Domar economy is a closed one, so there is no lending to or borrowing from the rest of the world, and Eq. (5) of the Harrod-Domar model rules out change in stocks. Ignoring the residual error, then, Harrod-Donar gross saving equals gross addition to national wealth equals gross fixed asset formation. Harrod-Domar net saving at 1963 prices equals I as defined in Section 2 above. Harrod-Domar net national product at 1963 prices equals X as defined there. In Figures 3 and 4 we have plotted corresponding values of I and X thus defined for each of the sixteen years 1954-1969 for each of the eight countries. If for any country for any of the sixteen points a straight line were drawn to the origin, the slope of that line would represent the value of the propensity to save ae Me Ee ei a4 Pa i ; ape oe i | eae sf oO Pi iy a ee Hy PG hein “ atavoson CORO ald to @ dquo a wont OL i ee 18 i | itinow Lo nokvan oF noky tbs soon tay ootonber $0 ‘ett eur £0 ~ aunt eloote ab apnerio 2 eusg Hoke? soend bow wale ni ees A sbitow ony Yo feos ont of grind ton ig ‘sont cu . | "ot gated on at otteild oe vena boeats, 8 et ‘yonote sesnoll-bo 7 aT. ent to cay pa bats know ods Ro vane ont dno? Bain ont gakrorg? sstvote nk ‘wamarta tuo. oot Eubodt ‘qoinoU-be 220o7y eisape’ paves’ paory enivodbowtit steele tors sub Hosni teres bexit secs ‘wLeups tt tnbw Lenotssre of nobe at beniteb se I sLoups oping caek ite pnives fort rst bot meee cael ts souborg, teaokten ten aemod-bowisit sevods $ | | | = “anody beniteb 25 ea int t0 seulnv pabbisqaecace betota ovad ih mi bn’ e ‘eonuyd ak 74s mot eael~ soot: etsay motte | eet to dose 0% bontteb HS : od to yas tot vata yas a0? ar seobatnuon: aegte’ sity oqole, ott Abubxe edt of none ot onks igients & ataiog : ovse ‘ot eo henoqotg odt ae oulsy edt snbabager bivow onbE toss jh i—» @ Oe 5:0 0.40 Fe) wo rep) Geeeto).<310 A so Zi a cok p a 4 Oo ae ey © fe) Ore iS Solas AS 2 ox CUE Ae eee eae W 0.05 = SS De a a Das ik 2 3 vee Gross national product per capita, Ubi thousands: of Ws tS. dollars FIGURE 5.-—PROPENSITY TO SAVE AS A FUNCTION OF GROSS NATIONAL PRODUCT PER CAPITA, INTERNATIONAL CROSS SECTION «4 = Ss a oo ie — = , a 7 ca ys ua yy > eae AOL tad - Ct) Cree v un" Caen e a _ oy ; rh mF i he ms fn | sity See 7 uP a) ¥ a * \ “ ¥ 1 i. { ' *) 7 Vy . Bs / ie f t tem a bad i’ & ; taf OF RAT Tae Losioizan, 80nd ahnaaventy ~ldel / ’ oy tiniewasi 4 5) . 2 ‘U +o Toe ia ye ) 1. oo a ra _ are a? a Leet YO HOTPOMON BA DRE GT WTLAAIIONI—.< RAVOLT® Noe LORD TAMOTRARMATAL jANTEAO 127, TOMCORT sTAMOLEAM i * i ; - ri - ; > 4 q _ ; ay iy ~ my a - i” ite he ea tes for that year in that country. The sixteen lines would cluster very heavily. To avoid the congestion, they have not been drawn explicitly. For each country one straight line through the origin has been drawn. For each country, sum net investment over the sixteen years as before and call the result ZI. Sum net national product over the same sixteen years and call the result EX. The slope of the straight line through the origin shows the ratio LI/=x = 1+ ¢ representing the overall propensity to save for the entire period 1954-1969. The eight values of 1 - ¢ appear as labels on the straight lines through the origins in Figures 3 and 4 as well as in the second column of Table 1. Figures 3 and 4 raise the same two questions as did Figures 1 and 2. In each country could the sixteen implicit, undrawn, lines through the origin be said to cluster around the drawn one? The answer is that the cluster is far better than it was in Figures 1 = a hers and 2. Furthermore, no noticeable difference between the marginal and the average propensity to save exists in Finland, Germany, Norway, or the United States. But in Denmark, France, Japan, and the Netherlands the marginal propensity to save is visibly higher than the average one. This is another way of saying that the Danish, French, Japanese, and Dutch average propensity to save must have been rising from 1954 to 1969. The second question raised by Figures 3 and 4 is whether or not the eight countries differ in their propensities to save. They do indeed: The highest value 0.223 (Japan) is about 2°/, times the lowest value 0.981 (United Pee can such differences be explained? Much of them will be explained by per capita gross national product. Use Part One, lower table p. 10 to define y = gross national product at market prices per capita in U. S. dollars for 1961 In Figure 5 we have plotted corresponding values of 1 - c and y for each of the eight countries. On the double-logarithmic scale ‘ie 0 oe ee Ny ir an ; id ‘a ay 7 , wilt | A vay, Fan Pe te? ony Ah rf ‘ ey LCcl Ser 4 4 tia if } y i, 5 Uy ees al Gees . et ay hale a ae ee eee) OR) Se eee ey mi H iat bee en ry ~y Lent , ‘ ti t ve re Pee a f tO Pre ma) ae 7 ia AT, am f F STA BEE cr oh. Tn a wae ete oh ? - pd ; De ; Ne RT eae Ue emer) Ob Cn aa a ny \ ‘ena ‘ H Wk y ee : i f ‘is } oi Pn 7 as Ps > , ren ee Po is oe OS Teh Oe on ian , LS) aK oh a oF ea ee i ‘ fo PADS Pee ir F io i } oY i aed ay, i Lai ut i) Renal a tetadio biuow eents, meet ia | oft ‘ seranues deste ak feces ake nwereh aved ton ivan vents saobaaognes: edt Bhods, er ee | Del a } t Wah ¥ . ‘ See j , i Lan ae ; : oe va, é “f ; . a wv 1 es rm, aor nisi acts cued omik, [ tiotense: one iav9e tore * Bs | aootute ont ‘teve snumtpovad ren me certains foes aol | : S i doubonq Lenoksan tan mie Pee. ‘thueer edd ‘Eize ban oxoted ep i a, to, eqote oat ite siuaots ont! ‘tine bas annoy aostute ance : | : ip ie ba iran verte x alain odd dower ake ec ¥ zeal Li \ whi oh nik vi ios “yayrz i Be alse i bebe oritne ott ok ovES ca teregone Luireve elt anit i eis: srt no grates, en areas a £ to poulev ‘ttyte oT 48 eet * oft nb a5 tow 2B. 4 ‘bas § aru nk angio oat dguond ee oon | Wry . | i) 4g eidat Yo. ee Ret) f siligi bib ¢ as. “aaoktepup ows ome oft aioe # brs e ans a ponil emvectbras etkoEaink noodute ort bEY09 ‘yatauco fore a | ed? fort mn sit. bavots netauts ot bina od népicno 2 Be . i fe. of sary k ot ann ial at aotiod mek ak woteuta ei aadt oh a : . We has le nA ; Wi ns pat iv Py at : i ‘ E.4 } ‘aioe aN a ; Fike ~ Pers ik i f fh en ot bose i ) war Lee, \ ’ Me , iu ie Le te Die vo ‘ ye See aL ea so Ta ty a’ Ass oe ! hy wa ie aw Ue a - A " ; ay ‘ u ; i icon \ nae See and 2. Furthermore, no noticeable difference between the marginal and the average propensity to save exists in Finland, Germany, Norway, or the United States. But in Denmark, France, Japan, and the Netherlands the marginal propensity to save is visibly higher than the average one. This is another way of saying that the Danish, French, Japanese, and Dutch average propensity to save must have been rising from 1954 to 1969. The second qucstion raised by Figures 3 and 4 is whether or not the eight countries differ in their propensities to save. They do indeed: The highest value 0.223 (Japan) is about 2°/, times the lowest value 0.981 (United Se Ae can such differences be explained? Much of them will be explained by per capita gross national product. Use Part One, lower table p. 10 to define y = gross national product at market prices per capita in U. S. dollars for 1961 In Figure 5 we have plotted corresponding values of 1 - c and y for each of the eight countries. On the double-logarithmic scale gee wnat «bane at abekxd. over ot + Leaotont, en 6 bes ,feqsbl . sais rsanec ag ud " yeogeve oe ott a aodgid widkaty st vee ot viieagoye Lontgrtpe ot abaniise yn ‘\ileined od? tedt sakysa 6 uate nodzons ak ein i ‘200! egenevs: . ts ty Tes at en ee sie wits | or 820k wot gad : ton 0 ronsodw sk u bas 5 A sont ya beaten noktesup noose’ Se ob yetiT-..evse of + aeisieneqoxg ukoils as ae ‘ebistau0s a . avert Faum oVB@ oF sprbaniiqnrg egpiovs: coded ‘oni _esensget Ab oat aonkt «\ s tuods ei (neqaby eee.0 outey: taorgtd edt od saonexo%t: 6 fove aso voit *absaee | bostasy 180.0, oul _ Be01g ntiqso 12g vd: benkalgne od” cote, ma te oul , oniteb oy OL ag plist sow! 900 tand-o6U” -touborg & Fey “ a 4 7 } a ; ; i Sy aK * Fal g y a ‘ tay i ; es; j Te yg ¢ q is2 .U ab atigso weq aooing ease 3s Soubouq Lanotzem Be ee oe tint tanpol-elduveb ons, Las sdetadhues Aagte ort — S| Ses used, the relationship is well approximated by a negatively sloped straight line. Why negatively sloped? Remember that we have measured saving by measuring investment. OECD accounts know only investment in physical capital. If, as they advance, economies invest more in human capital (education) and less in physical capital, the propensity to save as measured will drop as observed. 4. Calculated Versus Actual Growth Rates The solution (6) of the Harrod-Domar model finds the proportion- ate rate of growth of output to equal the ratio between the propensity to save and the capital coefficient. That ratio is shown in the third column of Table 1 and may be confronted with the actual rate of growth shown in the fourth column. Should we congratulate ourselves on the ood correspondence between calculated and actual growth rate? Much of the correspondence must be inherent: Let growth be steady-state growth and let v and t be any two points of time. That Pecimcvat inh ar oie ee - beqote vievitesan f ve betamixorqer “Low eb qivenottesen 2 gow | iv os, ee ay aah a vomit ea qatves ‘betirente ved ow. Sade xodmonne A ‘Sbogete sbwsenond Leotevrta ae tnecdeoved xine’ worst adnuooor 30 | tSaemacoved - frtigns minwuaset fe oon teovnd eoimonose (ysnovbs: yous ee a ’ 86 ove ot eitieanare ony einsiqas tadteude ab\eeek brn. (ae | ‘ | sbuvaoede ‘ee Gort utws - rm al ip { o4 y eu oe a ae) 4 phe ei Satan eS ee ‘goknd’ diswox9 sudo evans bites ono! Foaoeg ont’ ebait Lebor asaol-borsait ‘ona %o. 4a) noitute vikeriegorg: ont noswtod olgat ont Erups: oF tugs to de wory, to 94 ” iy: edt ab awoda: ‘ab obtaa ind “taoboitioen teviges » vit nee dtworxg te tee isusos efit tie Borncvtnon | of wen bas i efdc? & on no: gavieeTvo. statute A009 ‘OW, stworte E08 diet shoal ‘ Sater dovorn Lsuton brs bute ntuotes asowted ages sd Atwors, tod sonevadad cot saa ‘consbroqeantoo ortt Jo fol foiT .amtt to atniog: ows i sd +t ‘bas, v sli: Sas dovorg otates ee - y a e | 2B os a variable X is growing at the steady-state rate B,, may then be defined 7) XCE) Se X(v) Now we estimated the overall propensity to save 1 - c as YI/IX and the overall capital coefficient b as ZI/ZAX, hence (i = e)/b ZAX/=EX = CX(1969) - X€1953)]/£X(1954 + ... + X(1969)] With v = 1953 and t LUSH «25 5) 2969 Use ~C7) upon thas: 16¢,, By 16g, (8) Gis -evainteecer ee ee oe we es ) In the denominator, find the sum of the terms of the geometrical progression and write Gi elf(p =. i = 'e yn Mr ihy Mane APN (aie : oy it “ mal 1 } ae a ce ‘ le ae igs ye . yt ie ; 4 = ; A ‘ f a ai nt i ee year: A 7 it h ea) 7 ih : 7 ‘ : pa A rw f > f i a ie t 4 i ve wo ma ‘4 | . ; 4, i és Pek Bea" re ‘ el ys ite oe wr | thy. 9K ped Pt biewe i i att yer mh ‘ le e “MINTS” 26 o- Lovee ee @hincqoi ittonsve ‘sate boveateas ch 4 ame, eontod t eXAS\IE en d sustottive Lstiqeo Lisiove ef 7 ; . : ; - . a 4 b. Te) " ie ae a mal is ed Me a . Si an ieee aut ‘ i z feeaerx +... + seen caer - copes 2 REAR 5) fi - } j a ; ane i S 3 anes nua i pronase ees gt vB ROLY . fuel a y ig eT ae ‘* - a ONCE hae a if @) at hiss mis eb at ' _ | ae edt to ditto | ett 20 fable ont ‘bata aorta ote 7 ; ; eat pe enh -othaw ban nokesongong 6 ‘tal a 4 ea rs ? Sih an i i Me t | vie af £ "t ; Re ea ds to i : ‘ fy i ~ f i ; a ~ a / Pi Lay j i, hie i . Bs ae oi 1 : - i ' fi rh iti a an vA } 7 ! r da ae ' | ' - mn it i} : 4 i AN : ne - ' ’ y iy y x 7 7 i a) Je a ; va nis Ws he ar i = ie So far in this section, all equalities have been definitional ones. But a Seis tf OT FIP St es. Replacing x by “Sy we have (9) io @ = where the symbol = is used to denote approximate equality. In addition to this approximation, the steady-state growth assumed in (7) was an approximation to actual growth, hence the sum of the terms of the geometrical progression in the denominator of (8) was also an approximation. Approximations (7) as well as (9) being good, we expect the third column of Table 1 to be a good approximation to the fourth column. oy [ Rar aed es! Pip teh i mT Charlo a bh as" ittisups otamixaiidain stonsb ‘ot eer ek = ‘soda | és. ‘mk dSemueas icy ofete-ybootd odd enobtsiixonads, htt tc to emiet ods to wise ole ans Hise. Sputonet aoktén sorte = 98 bets Baw ca) to tetenitionsh ois fi iiodesengors task | sboue anied Oy 3s. ‘Eeew 26 ey saottemixorggh mobs ad ot noinoabioneds Boos & od ot é aide? Ao imtoo buds ont 4 ie ee FOO) N 0. T ES loapital coefficients require net national product data, and those in turn require depreciation data. Belgium and Switzerland offer depreciation data only from 1956; Sweden offers none at all. 2Denoting our variables c consumption g., = proportionate rate of growth of output I = investment S = Capital ‘stock Mee TOWED UE and using two parameters, i. propensity to consume c, the Harrod-Domar model [2], [3], (1) (2) (3) (4) (5) (6) x C X Taking (1) through (5) oO oO ox e., the capital coefficient b and the following six equations constitute the [5], and [8]: Vv a dt |r as dt = bX = eX ese ey ee together we solve for Byt =—(12=e)i/b NE ’ m™. oft Bas d gaetaiveens Intiqso ony eitlek ‘erotomonnd ow? yak edt stutitenoo enoktsups ¥ie sniwol lot ont 9° ‘emwemtoo oF habs: p f es 4 heal. At i ( i TV ey, Les i i ie rae oe ; iw ae 4 H pie 2aTouT ode, Se ban ‘gate povhen ‘Esnottnn tor oakupes oe Leth bar feustive bis suelo a pe) mokteiovaqub orskupat aut nk & fis tn ono atetio mobowe.. Rsk ot mort Rage gab nobtriownqab + ‘madden WO snbtedei is | soraieeeae 2-3 ee he tuqtue te primer to oem otsniolisoqoxy 2 e 4 Sh uc Eon ein Ree ne taomteovits. 1 a! Sore ve dos Deshsaeend = ae Vie car’ £8) bas «£23 «CEI .[83 fobom one “0 oe ' Xd = 2 | q ‘Sp 29 : \ way iy 108 evioe ow mone enee «@ fquonds w waited j me ) | aq 4 ' y rt iti i aia RaW eae | mo \ ene 2 ee 3 The German cluster is much bctter than it looks: Adding in 1960 the Saar and West Berlin to the territory covered means, in effect, treating the 1960 Saar and West Berlin product as an increment to the German product without treating existing Saar and West Berlin capital stock as German investment. Since that existing capital stock is not known, we made no attempt to remedy the anomaly. As a result, the slope of a straight line connecting the 1960 point with the origin must be too low. “The United States capital coefficient and propensity to save are both understated, because United States government expenditure on machinery and equipment is treated as government current expend- iture rather than as gross domestic fixed asset formation. How much understated? Government gross fixed asset formation, defined as excluding machinery and equipment, is known, [10], Part Three, Table 7, Line 19. Deduct it from gross domestic fixed asset formation minus machinery and equipment, [10], Part Three, Table 1, Lines 3 minus 3c, and find nongovernment gross fixed asset formation other than machinery and equipment. Domestic is around */3 of nongovernment sross fixed asset formation other than machinery and equipment. Suppose the fraction */3 applicd to machinery and equipment as well. Then gross domestic fixed asset formation with government expenditure on machinery and cquipment included would be around '/., higher than as recorded without. If the same were truc of net domestic fixed asset formation, then our understated capital coefficient and propensity to save should both be raised by '/.5 to 2.66 and 0.095, respectively. Even so, still no other country would have lower values than the United States. bs os, bie Ki migatbbA -:extool Th acd aottod fou at novus jae oA mk - 14 BABS betevoo wiosiarot ‘oat oF mifnod. feo! has 1248 2 fn es touboxrq aiived Feel! brn: ane8 oaeL sit pene bin %658 piiteina gntinett tuortsiy. touboud asmwd ads ot ins goitekxo | tadt sonke Snomteovat: ares} en xoote- tetiqso nite —ivismons | ont ybomos ot tamotts on “ebam ow tno ton at god | tniog, 08@L att ; pakvoonno: aaik, Aagteszs, B to. egote ‘odt Pop a Ve as oie ah oot +4; tebe peace eves ot utiensqord Das) gngto#Vtsea Eotkgeo wbeenae: peek . _otutibnagqxe ‘Sronnroveg dotase bohiau ‘peurasd ) doiiguestnavenntaetaoynl sie , FOBT my Wahi (320i emegninborty sitet anet le at nedenedss 2! gimonoot 22 sed sit nie sure re careahets hon | eee = bce areas Po Lsccigiae soticiderns fee = joka taser: or a o “0 reread): geet: 20k ¥ Ne mt { ihe cd — 7 ine mY : 2 ee a SA ITE TL HCE RERY Af Ws ive iy Bold a fled WY aide i by, & PAI PLES 4. GED: Wsejysatin veld abi fete fa basiitlaty 610 Dinah ied A bee if BO Tavares yh at Lj 4 oe tansy CT te erp Dr ' 5 pet tl pignitd. eet LOAM aCe pent a Fiat att : : / SHON OL bs eR Wi tyit t F fac’ hareeeey! Gals Aainl. Syefetie rl Y ) : x : nagdeatyea FDP aCe Pe : ‘ ; tarde bese nid its nA Ne pene 4 ' ' : Testoreet tetas Sig yan } iy ; Lier tare seigetau da aie : Maat : , Sr Praca Re ee pense Dre aw CTI TTORT ET anhhy reat ot eah thes ash tas bia ta dine TAL atest or Piatt nlite fh akhetone gehts ? YE ‘ ies ; t UNIVERSITY OF ILLINO al baa deat a shany at eaateaty oth = . —r—,,:—COCMEFEF?]. TT ey Bee UN Pain a Hi | te Mittal " 060296891 bakes Cer oer Otilatt Hr pe fimes wet bp 03 aid sth cits ees Phir a 4 Os Hind Abi Balhem Weulae Mtooipinsnactirhyvisntsins ALS MB) aot peery DME HEMET SS ALY RAE ATE Mabie ncabe wane meds Bit yby he be8 mais en patente Gs pestuneeANtvk Praeies mirkate hh “ Paar or ae sili Teele a reer Sreanteead tba Sete te Digesmna tease hegba end NEA TE eectaranie Fy Penechiataisetobese tater fctaias Peds tih Bt ab soa heal a kenfied ernest Bp tyne ye) fone thud tenet CoM areca Tene LST doe Tian 1a edhe devine ere) Benak inamebetest Si hhet ri pe dabenjadete fae tered ie. astegthen wheroull abe densi Pte hGS. whee Resa lanal ga tnhee Peacdochnhe bane eyes tone TR ein seta) mp mtelay bead sebea oe eh be! Feith nein teases ne een age a Ditein Alan basal #a\By bes Fat ada cpncsia abated TacapkeDh nk dieed tu bben te teh nh ssid & eas a SUAS A fie beh at ds eygte xen eee Sapelk epee bette disitand scidipe We Tectee: Lyiikenhelnen diem Nike iby. bah ete 4 Piet irdelner sete as tnt ah ayate nara nite Bown Bek a Phy ey ee nete a sry Seevae SORA PEI GE Sean? Srottiaritaredsses set Ctrerrinttrnr tsar yeieeegtay retary tye tee! rawr: Trees vee Jy SSP eUY plop nas: ahh Veuran yee chserereeyiyeyeyiis f . Minoy Jy Sw Hy rareyay steey tar ony Ws teurye Pukatartet yabd dnapea Ty EUny: Spee ihy ary) ety niger PaTh cin peyeen amenyaa ct evlergey Ser were Povaruan ye atyty Papeueatiyry wie ey yhe Wy ete severly ice Et bo Lip) hes pat Sp piety su tiie Perera sisriyte Mad aku tet raeye rt etenw Caper vrs pire peat unghy tere atetoprrreyseayrune ay noha Por tee te erent ara! Seer aH : trediagend BN : SMa unre are f . Lefer ‘ Wed Levee sy sult oy kee ® Payee H hie . . we meytien org ey yqariwaeetl hee ways Patan sey teaeey tee cveceter ute vee ‘ 5 : ew ‘ } ' Pree are surehate : ; i ! t ‘ vik Wrduberery peyterqittalt haa uepreeheants La Webern masevet vi wracr doin ty tetas dws etary 4 . ‘ Serials avi ' Cw $ ’ ' : { i Sentero unr Lagi t ei . rt u ei tececrreryr ule ks prey HE ad CR a 5 wy ( Rete irsaseptec etetet } We \iert tn ne H errr?