Economic growth and the return to capital in developing economies

An important stylized fact of economic growth is that the rate of return to capital is relatively constant across countries and over time. This paper provides an explanation using a model of growth for a developing economy th at has a dualistic structure. Three conditions are derived, each of which m ay account for the observed stability of the return to capital. The results address Lucas' criticism of conventional growth models and support recent growth accounting studies of East Asian economies, which emphasize the role of increased factor inputs.