An Empirical Assessment of Global Capital Productivity

Julia Knolle and Kai Lehmann

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: Does the world experience a secular decline in capital productivity? Due to the long-run downward trend in interest rates, some economists do think so. However, this reasoning equates capital productivity with interest, which is a critical assumption. This paper presents a new proxy that can be used to estimate capital productivity. It is based on weighted average cost of capital (WACC), which are employed by firms in their investment appraisals as a benchmark return. The paper uses an original WACC data set for many OECD countries and for the time period 2000-2015. Data are adjusted for tax distortions and expected inflation. The principle finding is that the data do not indicate a long-run decline in capital productivity.

Keywords: Capital productivity; cost of capital; interest-growth-differential; WACC. (search for similar items in EconPapers)
JEL-codes: D24 E22 E43 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2016-04
New Economics Papers: this item is included in nep-eff and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-574

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