Estimation of the Rate of Return to Capital in the East African Community Countries (EAC)

Abdallah Othman () and Glenn Jenkins ()
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Abdallah Othman: Department of Banking and Finance, Eastern Mediterranean University, Famagusta, North Cyprus

No 2019-11, Development Discussion Papers from JDI Executive Programs

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.

Keywords: Capital Return; Public and Private Investment; Economic Growth; East Africa (search for similar items in EconPapers)
JEL-codes: E01 E22 E60 H43 N17 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019-11
New Economics Papers: this item is included in nep-mac
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