Investment rate vs relative price of invesment

Abstract

In this paper I accomplish a levels account exercise across countries lo order to calculate contributions from differences in the relative price of investment and the investment rate to differences in the physical capital-output ratio -and consequently in output per worker- across countries. I find that differences lo the relative price of investment account for most differences in the physical capital-output ratio across countries and consequently, if capital share is broadly consistent with national income accounts data, they have a moderate importance in accounting for differences lo output per worker. However, differences in the investment rate account for very little disparity in physical capital-output ratio and output per worker across countries. In this paper I accomplish a levels account exercise across countries lo order to calculate contributions from differences in the relative price of investment and the investment rate to differences in the physical capital-output ratio -and consequently in output per worker- across countries. I find that differences lo the relative price of investment account for most differences in the physical capital-output ratio across countries and consequently, if capital share is broadly consistent with national income accounts data, they have a moderate importance in accounting for differences lo output per worker. However, differences in the investment rate account for very little disparity in physical capital-output ratio and output per worker across countries.