Accounting for Cross-Country Income Differences with Public Capital

Abstract

This paper offers new evidence on the sources of cross-country income differences by investigating the role public capital in development accounting. I explicitly measure private and public capital stocks, and I find large differences in both types of capital across countries. Moreover, differences in private capital are larger than the ones I find for total capital for the richest and poorest countries. The methodology I use implies a share of publica capital in output of at most 10%. My findings indicate that differences in capital stocks can not account for a substantial part of the observed dispersion in income across countries.Income differences, Public capital, Development Accounting.