Dynamics in the Returns to Capital: Natural Experimental Evidence from Indonesia

Po Yin Wong

Journal of Development Studies, 2022, vol. 58, issue 2, 388-409

Abstract: This paper uses the 2004 Indian Ocean tsunami as a natural experiment to estimate returns to capital over time. With a sample of surviving fishermen who lost their boats and received aid boats, we find that more productive fishermen before the disaster retained their productive edge ex-post, controlling for boat quality and fishing conditions. Returns to innate ability, measured by ex-ante productivity, became more important over time; while returns to physical capital became less important. These findings highlight the importance of innate ability in explaining long-run productivity.

Date: 2022
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DOI: 10.1080/00220388.2021.2003334

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