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Optimal capital investment structure and sustainable development: Evidence from China

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  • Cheng, Yiyang
  • Ru, Shaofeng
  • Kader, Gavin

Abstract

This paper studies how capital structure (physical, human, environmental, and social capital) affects sustainable development. This paper constructs a model for optimal sustainable development and deduces the necessary condition is that the input ratio of per capita human capital, environmental capital, and social capital are equal to their respective output elasticity ratios. Using data from China (2007–2020), empirical tests confirm smaller deviations between output elasticity ratios and the actual input ratio are associated with higher sustainable development. This paper concludes that, unlike physical capital, investment in human, environmental, and social capital promote sustainable development.

Suggested Citation

  • Cheng, Yiyang & Ru, Shaofeng & Kader, Gavin, 2023. "Optimal capital investment structure and sustainable development: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s154461232300836x
    DOI: 10.1016/j.frl.2023.104464
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