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Estimation of the rate of return to capital in the East African Community (EAC) Countries

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  • Abdallah Othman
  • Glenn P. Jenkins

Abstract

The real rate of return to capital plays a vital part in the economy in evaluating the contribution of capital investment to the economic growth. As it is also a key variable in estimating the economic opportunity cost of capital for use as the economic discount rate in investment decision-making. The objective of this study is to estimate the economic real rates of return to reproducible and remunerative capital of the EAC economies. The results indicate that the real rates of return to reproducible capital over the period 1999–2016 have averaged 10.70% in Kenya and Rwanda, while it averaged 12.05% and 9.86% in Tanzania and Uganda, respectively. With regard to the marginal rates of return to remunerative capital, the results suggest that EAC countries have averaged 16.28%, 16.21%, 15.07% and 14.49% in Tanzania, Rwanda, Kenya and Uganda, respectively, over the same period.

Suggested Citation

  • Abdallah Othman & Glenn P. Jenkins, 2020. "Estimation of the rate of return to capital in the East African Community (EAC) Countries," Applied Economics, Taylor & Francis Journals, vol. 52(30), pages 3257-3273, June.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:30:p:3257-3273
    DOI: 10.1080/00036846.2019.1708255
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    Cited by:

    1. Thanh Dinh Su & Canh Phuc Nguyen, 2022. "Foreign financial flows, human capital and economic growth in African developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3010-3031, July.
    2. Abdallah Othman & Glenn P. Jenkins & Mikhail Miklyaev, 2022. "Estimation of Economic Opportunity Cost of Capital: An Operational Guide for Mozambique," Development Discussion Papers 2022-04, JDI Executive Programs.

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