INTERNATIONAL DIFFERENCES IN CAPITAL RETURNS AND WAGE RATES

Kanji Haitani

Kyklos, 1970, vol. 23, issue 2, 272-278

Abstract: The disparities in international differences between wage rates and between the rates of return on capital cannot be fully explained by using the functional relationship between the wage/rental ratio and the capital/labor ratio. Nor can it be explained adequately by the differences in the degree of international mobility of the two factors. This paper presents an alternative explanation of the disparities. They are attributed to the fact that the output/labor ratios vary across countries much more widely than the output/capital ratios, which fact in turn may be explained by the typically greater degree of labor/capital substitutability toward the higher labor/capital end of the isoquants, and the international differences in the efficiency of production functions.

Date: 1970
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