The capital-output ration :its stability and usefulness in development planning

Abstract

It is important to distinguish between average and marginal capital output ratio. The average capital-output ratio is the value of the total stock of capital divided by the total annual income; while the marginal or incremental capital-output ratio is the total value of stock of capital divided by total annual income. Net-investment is estimated over the plan period, the increase in net output is also estimated between the beginning of plan period and the last year of the plan. All measurements are made at the same price level. Many African countries use the marginal or incremental capital output ratio in their plans, therefore, selected Nigeria, Sudan, Ghana and Ethiopia to show how these countries use the capital output ratio approach.