The (Mis)Allocation of Capital

Abhijit Banerjee, Esther Duflo and Kaivan Munshi

Journal of the European Economic Association, 2003, vol. 1, issue 2-3, 484-494

Abstract: Is capital allocated so that its marginal product is equated to the market interest rate? Is the marginal product of capital equalized across its alternative uses? This paper attempts to answer both of these questions using data from India, and concludes that both these standard properties fail by a wide margin. (JEL: O16, G2) Copyright (c) 2003 The European Economic Association.

Date: 2003
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