Growth, Productivity, and the Rate of Returnon Capital

Bankim Chadha and Charles Adams

No 1992/035, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the ability of alternative classes of growth models to explain the historical experience of the U.S. economy. The potential returns to the U.S. from raising its investment rate in terms of both the level and growth rate of future output are then quantified. The long-run growth performance of the U.S. economy is found to be broadly consistent with the predictions of the neoclassical growth model. Endogenous growth models, which suggest a larger contribution of capital to growth and long-run effects of investment on the growth rate, do not seem to be supported by the data.

Keywords: WP; production function; diminishing returns; depreciation rate; income share; growth contribution; investment rate; labor input; augmented labor; Neoclassical theory; Capital productivity; Production growth; Capital income (search for similar items in EconPapers)
Pages: 40
Date: 1992-05-01
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