The Return to Capital in China

41 Pages Posted: 17 Oct 2019

See all articles by Chong-En Bai

Chong-En Bai

Tsinghua University - School of Economics & Management

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Yingyi Qian

University of California, Berkeley - Department of Economics

Date Written: December 2006

Abstract

China’s investment rate is one of the highest in the world, which naturally leads one to suspect that the return to capital in China must be quite low. Using the data from China’s national accounts, we estimate the rate of return to capital in China. We find that the aggregate rate of return to capital averaged 25% during 1978-1993, fell during 1993-1998, and has become flat at roughly 20% since 1998. This evidence suggests that the aggregate return to capital in China does not appear to be significantly lower than the return to capital in the rest of the world. We also find that the standard deviation of the rate of return to capital across Chinese provinces has fallen since 1978.

JEL Classification: E01, E22, E23, O11, O16, O53

Suggested Citation

Bai, Chong-En and Hsieh, Chang-Tai and Qian, Yingyi, The Return to Capital in China (December 2006). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-125. Available at SSRN: https://ssrn.com/abstract=3470785 or http://dx.doi.org/10.2139/ssrn.3470785

Chong-En Bai

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Chang-Tai Hsieh (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yingyi Qian

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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