Differences in Physical Capital across Countries

Available under Creative Commons-NonCommercial-ShareAlike 4.0 International License.

Not surprisingly, the United States also has a much larger capital stock than does Niger. The capital stock in the United States is worth about $30 trillion. India’s capital stock is about $3 trillion, and Niger’s capital stock is much, much smaller—about $9 billion. So what would happen if we also gave India and Niger the same amount of physical capital as the United States? Table 6.3 "Real GDP in the United States, India, and Niger if All Three Countries Had the Same Workforce and Physical Capital Stock" shows the answer.

India’s GDP, in this thought experiment, goes back to something close to its actual value of around $3 trillion. In other words, the extra capital compensates for the smaller workforce. Real GDP in the United States is still more than three times larger than that in India. The extra capital makes a big difference in Niger, increasing its output about ten-fold. Even if Niger had the same size workforce and the same amount of capital as the United States, however, it would still have only a tenth of the amount of output. The other two inputs— human capital and technology—evidently matter as well.

Table 6.3 Real GDP in the United States, India, and Niger if All Three Countries Had the Same Workforce and Physical Capital Stock