Edwards, Sebastian, 2002,“Capital Mobility, capital Controls, and Globalization in the Twenty-First Century,” The Annals of the American Academy of Political and Social Science, No. 597, Pages 261–270
Estevão, Marcello and Evridiki Tsounta, 2010, “Canada’s Potential Growth: Another Victim of the Crisis?”, IMF Working Paper, No. 10/13, International Monetary Fund.
This chapter was prepared by Gamal El-Masry and Lulu Shui.
There is no statistical release with information on the stock of capital in Barbados. For that, we used investment data from the national accounts and calculated the capital stock according to the perpetual inventory model, assuming a depreciation rate of 5 percent per year. The calculations began with data for 1980 and assumed an initial stock of capital that was about four times the annual investment at that time.
In other country cases, information on the number of hours worked or number of work shifts would improve the measurement of actual hours of work and the intensity of capital utilization, respectively. In addition, for Barbados, there is some evidence from discussions with union representatives and employers, that in the context of the Social Partnership arrangements, firms are encouraged to hang on as long as possible to their work force, even as they reduce working hours. Likewise, it is not uncommon for companies to “take advantage” of lower tourist demand to close whole wings of hotel facilities for renovation, thus reducing the utilization of the capital stock in times of weaker demand.
In this respect, the general phrase that “if the United States sneezes, then the Barbados economy catches a cold” appears to hold true for the past generation.
It is also possible that Barbados’ high debt is starting to adversely impact investment. In studying the impact of high public debt on long-run economic growth, Kumar and Woo (2010) estimated that a 10 percentage point increase in debt was associated with a decline in investment of 0.4 percentage points of GDP.
This drop was particularly severe among female wage earners, who saw their participation rate fall by 3.4 percentage points (from 64.5 percent in 2005 to 61.1 percent at end-2009), compared to a 1.8 percentage reduction for their male counterparts (from 75.2 percent in 2005 to 73.4 percent at end-2009).
As a case in point, the Central Bank of Barbados reported in its economic review for the third quarter of 2010 that continued low demand in the construction sector has forced the only cement company on the island to lay off half of its workforce, albeit temporarily.