The public and private marginal product of capital
Lowe, Matt; Papageorgiou, Chris; Perez Sebastian, Fidel
Professor Fidel Perez Sebastian F.Perez-Sebastian@hull.ac.uk
Professor in Economics
Why doesn't capital 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 MPK 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 the one from private capital.
|Journal Article Type||Article|
|Peer Reviewed||Peer Reviewed|
|APA6 Citation||Lowe, M., Papageorgiou, C., & Perez Sebastian, F. (2019). The public and private marginal product of capital. Economica, 86(342), 336-361. doi:10.1111/ecca.12268|
|Keywords||Marginal product of public and private capital; Public sector inefficiencies; Capital flows; Misallocation; The Lucas Paradox|
|Copyright Statement||This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.|
©2018 The authors
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