RATES OF RETURN TO PHYSICAL CAPITAL IN MANUFACTURING INDUSTRIES IN ARGENTINA 1

Abstract

The study covers most of the industrial (manufacturing) groups under the International Standard Industrial Classification at the three-digit level. Given the disparity in the size of groups and the way in which the sample was drawn, the results are presented for thirty-seven industrial groups. The estimates have been done for the corporate sector only. Of course, it would have been desirable to work with the noncorporate sector as well, but the necessary data were not available. Estimates of rate of return are useful for several purposes: 1. They provide a basic tool for project evaluation, both social and private. The discussion about the appropriate discount rate for social projects has been thoroughly reviewed in the literature. Professor Harberger has concluded that the appropriate rate is a weighted average of the private sector marginal productivity of capital and the net of tax yield on private savings. The estimates obtained in Section II provide useful information to approximate that rate. 2. Knowledge of rates of return in different sectors would also allow us to evaluate whether the allocation of capital among different areas is efficient or not. If we can show that there are significant differences among rates of return of different sectors, that these do not tend to narrow down over time, and that investment in the sectors with higher rates of return does lot increase in relation to other sectors, generally this would constitute evidence of a malfunctioning of the capital market. A partial evaluation along this line is made in Section II. 1 This article is based on material included in the Ph.D. dissertation presented in the