Empirical Evidence of a Negative Marginal Product of Capital
2018
If increased capital purchases lowers a firm's after-tax price of capital, the firm's marginal product of capital can be negative. The purpose of this paper is to explore empirical evidence of a negative marginal product of capital. Both macroeconomic evidence (Okun's Law) and microeconomic evidence (the wage elasticity of labor supply for individual firms) appear to imply a negative marginal product of capital for many if not most firms.
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