The Return On Private Capital Across Countries: Rising And Diverging

Title: The Return On Private Capital Across Countries: Rising And Diverging

Abstract: Across 88 countries for 1970-2014, the return on private capital (ROKP) has exhibited two phases, approximately constant from 1970-1990, but then rising dramatically from 1991-2014. This latter increase occurs for both Rich/Developed and Poor/Developing countries, though at an uneven pace; the Lucas Paradox seems to have become more pronounced in recent years. Despite falling real interest rates lowering ROKP’s, 60% [163%] of the secular rise in ROKP,POOR [ROKP,RICH] is explained by rising equity risk, depreciation, and markups and by the capital loss from expected decreases in the relative price of new capital. Policy implications are discussed.