Économie et Statistique n° 341-342 - Investment and Financing of Firms
Return on and Profitability of Capital in Six Industrialised Countries
This paper compares gross returns on capital in the United States, Japan and four European countries Germany, France, the Netherlands and the United Kingdom over the 1965-1999 period. These gross returns decreased through to the beginning of the 1980s before recovering throughout the 1980s and 1990s. These common trends went hand in hand with a stable country ranking placing the United States first and Japan last. The European countries remained closely grouped between these two ends of the scale throughout the period. These observations do not depend on the methods used to calculate the gross return indices. They are hence fairly robust. The accounting breakdown of the different gross returns based on mark-up, relative investment price and apparent capital productivity shows that the decrease in this latter factor was the main reason for the drop in gross returns in most of the countries over the 1965-1982 period. However, the reason for their upturn over the last twenty years is not the same in the Anglo Saxon countries as in the others. It is due to improved apparent capital productivity in the Anglo Saxon countries and a mark-up increase in the others. The gross profitability ranking is the same as the gross return ranking. However, this indicator was more affected by the oil shocks as a result of the consecutive increase in real interest rates. It has been growing more markedly since the early 1990s, due mainly to the decrease in real interest rates. France's profitability growth separates it out from the other European countries. The high level of real interest rates in France in the 1980s contributed to undermining average profitability, which deviated from the other European countries. However, since the early 1990s, real interest rates in Europe have converged and the gaps between the four European countries have narrowed.