Quality of Capital

ECONOMICS 3

Qualityof Capital

InstitutionalAffiliations

Qualityof Capital per Worker

Ineconomics,thewordcapitalreferto anything that has beenmadeby humanto assistthem to makegoodandservices,which are latersoldto theconsumers.Essentially,capitalis madeup of things,suchas toolsthat are usedto makea goodora service(McEachern, 2012). Forinstance,whentheIT expertusesa computerto developtheprogramsforsellingto theconsumers,thecomputerin thiscaseis regardedas thecapital.

MacEachern(2012) indicates thatcapitalcan becategorizedinto two, physicalcapitalandhumancapital.Physicalcapitalincludesthetoolsthat are createdby humanto facilitatethecreationof goodsandservices.On theotherhand,humancapitalincludesskillsandknowledgethatpeopleacquireto increasetheir productivity.

Thequalityof capitalper workeris theavailability andmeasureof howmuchcapitalis in theeconomyanditsapplicability.Ifthequalityof capitalper workerisimprovedtheeconomyexperiencesgrowth.Hence,theworkerswill be in a positionto makemoreservicesandgoodswith theavailableimprovedcapital.Forinstance,ifhumancapitalisimproved,a workerwill acquiremoreskillsandknowledge,which will increasehis/her productivityin theeconomy.In fact,an increasein capitalper workeris alsoknownas capitaldeepening,which raiseslaborproductivityandeventuallytheeconomicgrowth(McEachern, 2012).

Qualityof capitalper workeris an imperativeyardstickused to anticipateeconomicgrowth.Whenthequalityof capitalper everyworkerincreases,theproductivityon theotherhandincreasesandeventuallytheeconomicgrowthis experienced(Sabatini, 2008).

References

McEachern,W. A. (2012). Economics:A contemporary introduction.Mason, OH: South-Western Cengage Learning.

Sabatini,F. (2008). Social capital and the quality of economicdevelopment.Kyklos,&nbsp61(3),466-499.