In this paper we analyse the relationship between firm capital expenditure, profitability and employer contributions to defined benefit pension schemes. For most companies, contributions to finance pension obligations are generally equal to the service cost of the pension scheme. Contributions therefore equal the increase in the pension liability from one year’s additional pension benefit accrual by employees. However, for a large number of companies, their pension schemes are severely under-funded. Managers of these schemes will be pressured by employees and pension scheme trustees to provide additional financing so as to ensure sufficient assets in place to provide for future pension benefits to employees.
Rauh (2006) examines the relationship between capital expenditures and mandatory contributions to defined benefit pension schemes in a large sample of US corporations. He shows that capital expenditures fall in response to increased mandatory pension contributions. This relationship is shown to be present after controlling for pension scheme funding and the unobserved investment opportunities of the firm. For firms that are already financially constrained (low credit ratings), this result was shown to be even stronger.
Research and discussions on international trade strategies and economic growth performance goes back to Adam Smith’s major contribution “Wealth of Nations”. Although there is a common belief that openness in international trade has positive contributions to economic growth, theory and testing of models entails certain economic difficulties. We face two alternative approaches in testing long-term implications of implemented policies and long run productivity increases.
Initial attempt, is known as the neoclassical growth approach, which carries traditional growth properties. In this approach, majority adopting the Solow growth model emphasizes that long-term growth process relies on exogenous technological growth rate. Although empirical studies show a positive correlation between investment and growth of Per capita income, these models display level effects but not growth effects of investment changes. Basic reason for such a finding is the existence of diminishing returns. Under constant growth rate of exogenous technology, the economy experiences the process of income growth (level effect). The neoclassical growth theory is based on the assumption that every firm or economy can take and adopt a new technology without bearing any cost. Therefore, these models cannot capture the spillover effects of technology via international flows of capital goods and knowledge. Another assumption that bother neoclassical growth model is the perfect competition. However, the main characteristic of the new growth models that produce long-run growth effect is the imperfect competition of goods and factor markets.
We hope that you will find the guide educational, helpful, and entertaining, money saving, inspiring, and provocative. We have reached a crisis point within our country, surrounding its leaders, and its monetary system. We are on the brink of total collapse and economic chaos if we do not, as Americans, begin to educate ourselves as to what has been happening to lead us to the point we are at today. It matters not if you are Democrat or Republican or any other party, as “He who controls the money, it matters not who makes the laws.” We fought the British in the Revolutionary War to gain our Independence from the British Central Banks and yet here we are in a battle once again, against a force that has been incrementally putting in place legislation in our country to transfer the wealth and gain our property and assets. So far it has worked exactly as planned. The banks lobbyists have corrupted our politicians and taken over Congress. Top financial advisors to the White House are former Goldman Sachs CEOs.
