The Marginal Product of Capital. Francesco Caselli. Discussion by

Transcription

1 7 TH JACQUES POLAK ANNUAL RESEARCH CONFERENCE NOVEMBER 9-10, 2006 The Marginal Product of Capital Francesco Caselli Discussion by Chang-Tai Hsieh University of California, Berkeley The views expressed in this paper are those of the author(s) only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the paper.

2 Is MPK Higher in Poor Countries? MPK=R and RK Y = α => R= α ( K/ Y) Conventional Wisdom: Fact 1: K/Y Low in Poor Countries Fact 2: Capital Share (Roughly) the Same => MPK Higher In Poor Countries

3 MPKN PMPKN PRY CIV EGYBWA MUS COG BOL MAR BDI COL ECU PHL TUN URY ZAF CHL JORVEN TTO MEX LKA PERDZA HKG JAM CRI MYS IRL PAN SGP PRTKORNZL ESP GBRISR DNK CAN NLDNOR AUS FIN FRA AUT GRC JPN BEL ITA USA SWE CHE URY ECU PRY BWACHL CIV BOL PHL PER COL MAR VEN SGP HKG ISR CANIRL DNK AUS EGY ESP FIN GBR AUTBEL BDI JAM COG CRI DZA JOR MEXMUS TUN ZAF TTO MYS KOR PAN PRT NZL NLD JPN CHE FRA NOR USA ITA LKA SWE GRC MPKL PMPKL MUS BWA MAR PRY EGYJOR ZAF COGJAM LKA PHL TUNURY MEX CHL SGP CIV PER BOL COL KORESP CRI DZA GBRISR IRL PAN MYSPRT JPN FIN DNK CAN AUT NLD VENTTO AUSBEL BDI ECU GRC CHE FRA NOR ITA NZL SWE USA BWA SGP CHL ISR JOR KORESP DNK CHE CAN AUT AUSBEL CIV BOL COL FIN GBR IRL JAM JPN FRA ITA LKA MAR URY PHL PER PRY MEXMUS NLD BDI COG ECU EGY PAN TUN MYS PRT NOR GRC SWE CRI DZA VEN ZAF TTO NZL USA Figure I: The Marginal Product of Capital MP KN: naive estimate. MP KL : after correction for natural-capital. P MP KN: after correction for price differences. P MKL: after both corrections. Source: Heston et al. [2004], Bernanke and Gurkaynak [2001], and World Bank [2006]. Authors calculations. 18

4 Get the Facts Right Share of Reproducible Capital Lower in Poor Countries (Agricultural Sectors Larger) => MPK is Still Higher in Poor Countries, but Not By As Much as We Thought

5 Why is the MPK High in Poor Countries? Return to Capital Higher in Poor Countries => High Risk/Global Capital Market Imperfections Value of MPK is No Higher in Poor Countries

6 What is the Return to Capital? R PMPK P Y Y = and K PMPK K PY Y = α RP K PY K = =α Y α MPK = R = = PK PY P P ( ) ( ) K Y K Y

7 Is the Return to Capital Lower in Poor Countries? Fact 1: MPK Higher in Poor Countries (Although Not By As Much As We Thought) Fact 2: P K /P Y Also Higher in Poor Countries = MPK R P P = No Higher in Poor Countries ( ) K Y

8 MPKN PMPKN PRY CIV EGYBWA MUS COG BOL MAR BDI COL ECU PHL TUN URY ZAF CHL JORVEN TTO MEX LKA PERDZA HKG JAM CRI MYS IRL PAN SGP PRTKORNZL ESP GBRISR DNK CAN NLDNOR AUS FIN FRA AUT GRC JPN BEL ITA USA SWE CHE URY ECU PRY BWACHL CIV BOL PHL PER COL MAR VEN SGP HKG ISR CANIRL DNK AUS EGY ESP FIN GBR AUTBEL BDI JAM COG CRI DZA JOR MEXMUS TUN ZAF TTO MYS KOR PAN PRT NZL NLD JPN CHE FRA NOR USA ITA LKA SWE GRC MPKL PMPKL MUS BWA MAR PRY EGYJOR ZAF COGJAM LKA PHL TUNURY MEX CHL SGP CIV PER BOL COL KORESP CRI DZA GBRISR IRL PAN MYSPRT JPN FIN DNK CAN AUT NLD VENTTO AUSBEL BDI ECU GRC CHE FRA NOR ITA NZL SWE USA BWA SGP CHL ISR JOR KORESP DNK CHE CAN AUT AUSBEL CIV BOL COL FIN GBR IRL JAM JPN FRA ITA LKA MAR URY PHL PER PRY MEXMUS NLD BDI COG ECU EGY PAN TUN MYS PRT NOR GRC SWE CRI DZA VEN ZAF TTO NZL USA Figure I: The Marginal Product of Capital MP KN: naive estimate. MP KL : after correction for natural-capital. P MP KN: after correction for price differences. P MKL: after both corrections. Source: Heston et al. [2004], Bernanke and Gurkaynak [2001], and World Bank [2006]. Authors calculations. 18

9 Would World Output Increase If Capital Were to Flow to Poor Countries? Caselli-Feyrer: No But in world where aggregate return masks heterogeneity in returns?

10 Does China Benefit from Capital Flows? Aggregate Return to Capital About the Same as In Rest of World But Large Inflows of FDI => Second Best Response to Domestic Credit Market Imperfections

11 Why Is the Capital Share Higher in Rich Countries? Biased Technological Difference? Reallocation towards Higher Capital-Intensive Sectors (Ventura/H-O Effect)?

12 Summary MPK Higher In Poor Countries, But Not By As Much When Capital Shares are Measured Properly Value of MPK is NOT Higher in Poor Countries Would welfare increase with more capital flows from rich to poor?