Working Paper: NBER ID: w15897
Authors: Casey B. Mulligan; Luke Threinen
Abstract: Estimates of the marginal product of capital can help forecast economic growth, test competing business cycle theories, and perform cost-benefit analysis. This paper presents annual and quarterly estimates of the marginal product of capital in the U.S. separately for the residential and non-residential sectors. The two sectors had positively correlated marginal products until the 2000s, when the residential marginal product fell during the housing boom, and rose during the housing bust. By the end of 2009, the residential MPK was back to the level of the 1990s. Although off its lows, the non-residential MPK is still below its historical average.
Keywords: Marginal Product of Capital; Economic Growth; Business Cycles; Cost-Benefit Analysis; Residential Capital; Nonresidential Capital
JEL Codes: E22; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| marginal product of capital (MPK) (E23) | economic growth (O49) |
| capital stock (E22) | NDP (H69) |
| housing market conditions (R31) | marginal product of residential capital (MPR) (R31) |
| macroeconomic conditions (E66) | marginal product of nonresidential capital (MPNR) (E22) |
| marginal product of capital (MPK) (E23) | future economic growth (O49) |