The Public and Private Marginal Product of Capital
Why does capital not flow to developing countries as predicted by the neoclassical model? What are the direction and degree of capital misallocation across nations? We revisit these questions by removing public capital from total capital to achieve a more accurate estimate of the marginal productivi...
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| Published in | Economica (London) Vol. 86; no. 342; pp. 336 - 361 |
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| Main Authors | , , |
| Format | Journal Article |
| Language | English |
| Published |
London
Blackwell Publishing Ltd
01.04.2019
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| Subjects | |
| Online Access | Get full text |
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| Abstract | Why does capital not flow to developing countries as predicted by the neoclassical model? What are the direction and degree of capital misallocation across nations? We revisit these questions by removing public capital from total capital to achieve a more accurate estimate of the marginal productivity of private capital. We calculate marginal product of capital schedules in a large sample of advanced and developing countries. Our main result is that, in terms of the Lucas Paradox, private capital is allocated remarkably efficiently across nations. Tentative estimates of the marginal productivity of public capital suggest that the deadweight loss from public capital misallocation across countries can be much larger than that from private capital. |
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| AbstractList | Why does capital not flow to developing countries as predicted by the neoclassical model? What are the direction and degree of capital misallocation across nations? We revisit these questions by removing public capital from total capital to achieve a more accurate estimate of the marginal productivity of private capital. We calculate marginal product of capital schedules in a large sample of advanced and developing countries. Our main result is that, in terms of the Lucas Paradox, private capital is allocated remarkably efficiently across nations. Tentative estimates of the marginal productivity of public capital suggest that the deadweight loss from public capital misallocation across countries can be much larger than that from private capital. |
| Author | Perez‐Sebastian, Fidel Lowe, Matt Papageorgiou, Chris |
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| Cites_doi | 10.1016/S1574-0684(05)01009-9 10.1093/restud/rdt004 10.1016/j.worlddev.2013.11.012 10.3386/w8365 10.1515/9780691218052-005 10.1016/S0304-3878(98)00081-9 10.1086/260866 10.2307/30035911 10.1111/jeea.12106 10.1162/qjec.122.2.535 10.1162/003355302320935061 10.1016/j.jpubeco.2004.05.004 10.2139/ssrn.1273530 10.1111/joes.12037 10.1023/A:1026551519329 10.1016/S0165-1765(01)00382-2 10.20955/wp.2015.036 10.1016/j.jmoneco.2012.10.022 10.1093/wber/lhn007 10.2307/2534573 10.1353/eca.2007.0000 10.1093/0198287763.001.0001 10.1016/S1574-0684(05)01007-5 10.1086/452465 |
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| SubjectTerms | Developing countries Economic models LDCs Productivity |
| Title | The Public and Private Marginal Product of Capital |
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