Chapter

The Rate of Return

Maurice FitzGerald Scott

in A New View of Economic Growth

Published in print June 1991 | ISBN: 9780198287421
Published online November 2003 | e-ISBN: 9780191596872 | DOI: http://dx.doi.org/10.1093/0198287429.003.0007

Series: Clarendon Paperbacks

 The Rate of Return

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Three different proofs are given of a formula for the rate of return to investment in the growth model. Formulae are also derived for the rate of depreciation of the firm's capital stock (cumulative investment net of depreciation), and for the valuation ratio. These are used to derive rates of return and depreciation in various countries and periods, and (for the USA and UK, post Second World War) are compared with conventional estimates using the perpetual inventory method. There is empirical support here for the view that depreciation is a transfer of income from capital to labour.

Keywords: net capital stock; net present value; perpetual inventory method; rate of depreciation; rate of return; valuation ratio

Chapter.  16815 words.  Illustrated.

Subjects: Economic Development and Growth

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