The Return to Capital in Capital-Scarce Countries / Anusha Chari, Jennifer S. Rhee.

Format:

Book

Author/Creator:

Chari, Anusha.

Contributor:

National Bureau of Economic Research.

Rhee, Jennifer S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27675.

NBER working paper series no. w27675

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

In this paper, we use firm-level data to investigate the link between the marginal product of capital and financial rates of return across countries. Computed estimates from financial statement data show that capital-scarce countries display higher marginal products of capital. However, inflation-adjusted financial returns are roughly equal across capital-scarce and capital-abundant countries. The divergence between the marginal products of capital and financial returns implies that there may be little incentive for capital to flow to capital-scarce countries. We suggest that domestic capital-accumulation frictions such as sufficiently large capital adjustment costs can decouple financial rates of return from the marginal product of capital across countries.

Notes:

Print version record

August 2020.