TY  - JOUR
AU  - Caselli,Francesco
AU  - Feyrer,James
TI  - The Marginal Product of Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11551
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11551
L1  - http://www.nber.org/papers/w11551.pdf
N1  - Author contact info:
Francesco Caselli
Department of Economics
London School of Economics
Houghton Street
London WC2A 2AE
UNITED KINGDOM
Tel: (44) (0) 2079557498
E-Mail: f.caselli@lse.ac.uk

James Feyrer
Department of Economics
Dartmouth College
6106 Rockefeller Hall
Hanover, NH 03755-3514
Tel: 603/646-2533
Fax: 603/646-2122
E-Mail: james.feyrer@dartmouth.edu
AB  - 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. Attempts to provide an empirical answer to this question have so far been mostly indirect and based on heroic assumptions. The first contribution of this paper is to present new estimates of the cross-country dispersion of marginal products. We find that the MPK is much higher on average in poor countries. However, the financial rate of return from investing in physical capital is not much higher in poor countries, so heterogeneity in MPKs is not principally due to financial market frictions. Instead, the main culprit is the relatively high cost of investment goods in developing countries. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries' incomes.
ER  -