Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Marginal Product of Capital

Contents:

Author Info

  • Francesco Caselli
  • James Feyrer

Abstract

Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows. We use easily accessible macroeconomic data to shed light on this issue, and find that MPKs are remarkably similar across countries. Hence, there is no prima facie support for the view that international credit frictions play a major role in preventing capital flows from rich to poor countries. Lower capital ratios in these countries are instead attributable to lower endowments of complementary factors and lower efficiency, as well as to lower prices of output goods relative to capital. We also show that properly accounting for the share of income accruing to reproducible capital is critical to reach these conclusions. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries' incomes.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://cep.lse.ac.uk/pubs/download/dp0735.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0735.

as in new window
Length:
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:cep:cepdps:dp0735

Contact details of provider:
Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: investment; capital flows;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gourinchas, Pierre-Olivier & Jeanne, Olivier, 2003. "The Elusive Gains from International Financial Integration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3902, C.E.P.R. Discussion Papers.
  2. Lane Philip R., 2004. "Empirical Perspectives on Long-Term External Debt," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 4(1), pages 1-23, January.
  3. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, American Economic Association, vol. 97(3), pages 562-585, June.
  4. Daniel Cohen; Marcelo Soto, 2004. "Why are poor countries poor?," Econometric Society 2004 Latin American Meetings, Econometric Society 75, Econometric Society.
  5. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, Elsevier, vol. 45(7), pages 1195-1235.
  6. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
  7. N. Gregory Mankiw, 1995. "The Growth of Nations," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1732, Harvard - Institute of Economic Research.
  8. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 92-96, May.
  9. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
  10. Sebnem Kalemli-Ozcan & Laura Alfaro & Vadym Volosovych, 2003. "Why doesn’t Capital Flow from Rich to Poor Countries? An Empirical Investigation," Working Papers, Department of Economics, University of Houston 2003-01, Department of Economics, University of Houston.
  11. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(2), pages 458-474, April.
  12. Cohen, Daniel & Soto, Marcelo, 2002. "Why are Poor Countries Poor? A Message of Hope which Involves the Resolution of a Becker/Lucas Paradox," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3528, C.E.P.R. Discussion Papers.
  13. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  14. Casey B. Mulligan, 2002. "Capital, Interest, and Aggregate Intertemporal Substitution," NBER Working Papers 9373, National Bureau of Economic Research, Inc.
  15. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich-to-Poor Capital Flows," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 53-58, May.
  16. Gustavo Ventura & Paul Klein, 2004. "Do Migration Restrictions Matter?," Econometric Society 2004 North American Winter Meetings, Econometric Society 506, Econometric Society.
  17. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
  18. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(3), pages 359-382, December.
  19. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1997. "The poverty of nations: a quantitative exploration," Staff Report, Federal Reserve Bank of Minneapolis 204, Federal Reserve Bank of Minneapolis.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0735. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.