capital-output ratio


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capital-output ratio

a measure of how much additional CAPITAL is required to produce each extra unit of OUTPUT, or, put the other way round, the amount of extra output produced by each unit of added capital. The capital-output ratio indicates how ‘efficient’ new INVESTMENT is in contributing to ECONOMIC GROWTH. Assuming, for example, a 4:1 capital-output ratio, each four units of extra investment enables national output to grow by one unit. If the capital-output ratio is 2:1, however, then each two units of extra investment expands national income by one unit. See CAPITAL ACCUMULATION, PRODUCTIVITY.

See also SOLOW ECONOMIC-GROWTH MODEL.

References in periodicals archive ?
2016) confirmed that the overinvestment in the 1980s and 1990s led to a high capital-output ratio and a low rate of return on capital.
The intertemporal equilibrium dynamics of the capital-output ratio in all countries (regions) is obtained by inserting (19) into (14):
The lower level of national investments, measured in international currency has a negative impact on the capital-output ratio.
We choose the values of preference parameters [rho], [gamma], [lambda], and [beta] in such a way that our model economy's capital-output ratio matches that of the U.
Barrell (2009) illustrates that the magnitude of the output scars suffered from this channel depend both on the magnitude of the rise in the user cost of capital and on the initial capital-output ratio of the economy.
It helps to make consistent two empirical regularities: a capital-labor ratio that rises through time with a capital-output ratio that stays rather constant (Romer 1989).
Factor loadings values indicates that output, capital-output ratio, and ratio of wages of skilled to unskilled workers are coming under component two; this component has been named as domestic factors and ratio of FDI to GDP and ratio of total trade to GDP is coming under factor one; this factor is named as external factors.
A sampling of topics: the gains from international trade, protection and real wages, a reconsideration of the theory of value, the basic theorems of classical welfare economics, the economic implications of learning by doing, economies with a finite set of equilibria, and the influence of the capital-output ratio on real national income.
Next we explore how the capital-output ratio changes in the model.
It includes, such factors as: (i) productivity, (ii) input-output ratio, and (iii) capital-output ratio.
Equating the two equations for investment provides a growth path for income that is driven mainly by savings, as the capital-output ratio is constant, i.
The transitional dynamics of both the debt to GDP and the capital-output ratio after a temporarily increased primary surplus ratio is traced out algebraically.