ANALYSIS OF THE CORRELATION BETWEEN THE GDP EVOLUTIONS AND THE CAPITAL AND LABOR FACTORS IN ROMANIA

by Zaman, Gheorghe; Goschin, Zizi and Herteliu, Claudiu
Published in Romanian Journal of Economic Forecasting, 2005, volume 6 issue 3, 5-21

Abstract

The present study approaches the dynamic correlation between GDP and the gross fixed capital formation, based on the use of ICOR (incremental capital output ratio) indicator in order to determine the required investment volume for the period 2005-2008, under various efficiency conditions, including three variants of possible ICOR magnitude. The second part of the study deals with the correlation between GDP and capital and labor in the Romanian economy. On the basis of the computation of the Cobb-Douglas model whose parameters are used for forecasting the necessary growth of fixed capital formation in the period 2005-2008, the analysis shows a long term perpetuation (2000-2008) of under-performance situations, each time the investment rate being significantly higher than the output one .

Keywords: GDP growth, necessary fixed capital formation, ICOR, cross-section analysis, Cobb-Douglas production function, capital and labor contribution to GDP growth
JEL Classification: E22, C10, C31