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Estimation of the Rate of Return to Capital in the East African Community Countries (EAC)

Author

Listed:
  • Abdallah Othman

    (Department of Banking and Finance, Eastern Mediterranean University, Famagusta, North Cyprus)

  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Kingston, Ontario and Eastern Mediterranean University, North Cyprus)

Abstract

The real rate of return to capital plays a vital part in the economy in evaluating the contribution of capital investment to the economic growth. As it is also a key variable in estimating the economic opportunity cost of capital for use as the economic discount rate in investment decision making. The objective of this study is to estimate the economic real rates of return to reproducible and remunerative capital of the EAC economies. The results indicate that the real rates of return to reproducible capital over the period 1999 –2016 have averaged 10.70% in Kenya and Rwanda, while it averaged 12.05% and 9.86% in Tanzania and Uganda, respectively. With regard to the marginal rates of return to remunerative capital, the results suggest that EAC countries have averaged 16.28%, 16.21%, 15.07% and 14.49% in Tanzania, Rwanda, Kenya and Uganda, respectively, over the same period.

Suggested Citation

  • Abdallah Othman & Glenn P. Jenkins, 2019. "Estimation of the Rate of Return to Capital in the East African Community Countries (EAC)," Development Discussion Papers 2019-11, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:4533
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital Return; Public and Private Investment; Economic Growth; East Africa;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

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