Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144848
Authors: 
Knolle, Julia
Lehmann, Kai
Year of Publication: 
2016
Series/Report no.: 
Hannover Economic Papers (HEP) 574
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.
Subjects: 
capital productivity
cost of capital
interest-growth-differential
WACC
JEL: 
D24
E22
E43
Document Type: 
Working Paper

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