Economics, Capital utilization, Developing countires
The shortage of physical capital is often seen as the crucial constraint to growth in less developed countries (LDCs). Thus many development plans are based on the aggregate Harrod-Domar model where the growth of the economy is seen to depand only on the availability and the productivity of capital. A corollary of such a capital-centred approach to development is that the capital plant and machinery installed are utilized to the full. However, recent studies claim that capital under-utilization exists on a massive scale in manufacturing in LDCs and raise the possibility of a parabox in capital usage in capital-scarce LDCs. The purpose of this paper is to show that the extent of the under-utilization may have been exaggerated because of errors in the measurement of capital utilization.
Oxford Economic Papers
Lim, D. (1976). On the measurement of capital utilisation in less developed countries. Oxford Economic Papers, 28 (1), 149-159. http://dx.doi.org/10.1093/oxfordjournals.oep.a041335