capital accumulation


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capital accumulation

see CAPITAL FORMATION.

capital accumulation

or

capital formation

  1. 1the process of adding to the net physical CAPITAL STOCK of an economy in an attempt to achieve greater total output. The accumulation of CAPITAL GOODS represents foregone CONSUMPTION, which necessitates a reward to capital in the form of INTEREST, greater PROFITS or social benefit derived. The rate of accumulation of an economy's physical stock of capital is an important determinant of the rate of growth of an economy and is represented in various PRODUCTION FUNCTIONS and ECONOMIC GROWTH models. A branch of economics, called DEVELOPMENT ECONOMICS, devotes much of its analysis to determining appropriate rates of capital accumulation, type of capital required and types of investment project to maximize ‘development’ in underdeveloped countries (see DEVELOPING COUNTRY). In developed countries, the INTEREST RATE influences SAVINGS and INVESTMENT (capital accumulation) decisions, to a greater or lesser degree, in the private sector (see KEYNESIAN ECONOMICS) and can therefore be indirectly influenced by government. Government itself invests in the economy's INFRASTRUCTURE. This direct control over capital accumulation, and the indirect control over private investment, puts the onus of achieving the economy's optimal growth path on to the government. The nature of capital accumulation (whether CAPITAL WIDENING or CAPITAL DEEPENING) is also of considerable importance. See also CAPITAL CONSUMPTION, INVENTION, INNOVATION, CAPITAL-OUTPUT RATIO.
  2. the process of increasing the internally available CAPITAL of a particular firm by retaining earnings to add to RESERVES.
References in periodicals archive ?
These levels are positively related to physical capital accumulation and negatively related to population growth.
We estimate the effect of additional capital accumulation on the returns to capital and labor by parameterizing a Cobb-Douglas production function.
TISA gross domestic capital accumulation, $1,678 billion in 1981, as may be noted in the reconciliation presented in table B, is far larger than BEA gross private domestic investment.
Linking biological invasions to capital accumulation as we broadly define it seems to accord with most of the evidence on the introduction of nonindigenous species into new environments.
The biggest difference between the models involves the relationship between capital accumulation and fiscal policy.
In the model economy, there are four types of activities - final good production, intermediate good production, physical and human capital accumulation and innovative R&D.
This project was designed to be a comprehensive assessment of the determinants and consequences of human capital accumulation in rural areas.
Second, the increase in savings raises capital accumulation and hence reduces interest rates.
Optimal Income Taxation and Human Capital Accumulation.
Successive chapters review the work that has been done on capital accumulation, the role of human capital, the contribution of technological innovation, entrepreneurship and international trade.
The heavy burdens of rents and dues, the farm holder's financial obligations to his parents and siblings, and, not least, the recurrent cycles of poor and mediocre harvests, imposed powerful constraints on capital accumulation in Stavenow.
Section 3 highlights the policy implications of the discussion in section 2, focusing on the link between the process of capital accumulation and sustainable growth and poverty-reduction.

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