An Empirical Assessment of Global Capital Productivity

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.

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