Estimated economic effects of capital on sectoral production in Greece and the need to think of new production paradigms
The paper econometrically estimates the impact of manmade capital on production in Greece during 2010-2018 in two steps. It first estimates the overall effect of capital on sectoral gross value added in a translog production function setting, and then estimates the individual effects of nine types of capital on the residual of the said value ─the so-called, sectoral multifactor productivity.
By adding the effects associated with capital to the 2018 figures (a pre-pandemic year of economic expansion), the paper finds that if capital and other inputs are to contribute to output in the same manner they contributed in the recent past, it may be better if efforts are made in Greece with an eye to: (a) draw more investments in sectors that capital has positive effects, (b) sell overseas capital assets that are now inefficient (associated with negative effects on output) ─ otherwise organize the said assets in ways that they are more effective compared to the past or educate staff to operate them appropriately─ and (c) add new, technologically improved, such assets.
By identifying the sectors and types of capital associated with positive or other investment effects, the paper contributes to the discussion regarding the prospects of alternative economic development pathways in Greece; thus, helping direct one’s thoughts to the cases in which conditions may be ripe for the introduction of new investment and new production paradigms.