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A New View of Economic Growth$
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Maurice FitzGerald Scott

Print publication date: 1991

Print ISBN-13: 9780198287421

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198287429.001.0001

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The Rate of Return

The Rate of Return

Chapter:
(p.181) 7 The Rate of Return
Source:
A New View of Economic Growth
Author(s):

Maurice FitzGerald Scott

Publisher:
Oxford University Press
DOI:10.1093/0198287429.003.0007

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

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