 The Social Opportunity Cost of Capital in the Presence of Labour Market DistortionsCanadian Journal of Economics, 1989, vol. 22, issue 2, 245-62 Abstract: This paper examines the conditions under which the social opportunity cost of capital in a tax distorted economy is equal to the gross of tax return to capital plus the excess of the market over the shadow wage bill. Whenever public investment serves as an unpriced (or underpriced) input in the private sector's production process, only part of the excess of the market over the shadow wage bill should be attributed to private sector capital. In addition, whenever some of the benefits of public investment are appropriated by owners of capital, the gross-of-tax return to capital will tend to overstate the genuine marginal product of capital. The overall implication is that the social discount rate may be less than the gross-of-tax rate of return to capital in the private sector even if public investment crowds out private investment dollar for dollar. Date: 1989 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cje:issued:v:22:y:1989:i:2:p:245-62 Ordering information: This journal article can be ordered from Access Statistics for this article Canadian Journal of Economics is currently edited by Zhiqi Chen More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.