- The Price of Capital: Evidence from Trade Data
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- by Alfaro, Laura; Ahmed, Faisal Z.
- In this paper we use highly disaggregated data on trade in capital goods to study differences in the price of capital across countries. Our strategy is motivated by the fact that most countries import the bulk of machinery equipment (from a small number of industrialized countries). We find the price of imported capital goods to be negatively and significantly correlated with the income of the importing country. Because most low-income countries import the bulk of capital goods, our results provide suggestive evidence that capital goods are more expensive in poor countries, consistent with the conventional explanation regarding the low real investment rates in poor countries.
- Publication Type: WCFIA Working Paper
- Published Date: March 2007
- Field of Interest: International Economics
- Alfaro, Laura, and Faisal Z. Ahmed. "The Price of Capital: Evidence from Trade Data." Working Paper 2007-18, Weatherhead Center for International Affairs, Harvard University, 2007.
- Harvard Business School Working Paper 07-073