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For a developing economy, I've seen sources claiming that the capital-output ratio (more commonly known as ICOR) is high (e.g. here and here), while other sources claiming that it's low, like below (the answer is A):

enter image description here

I suppose I can come up with reasons why the ICOR or a developing country might be low: low rate of saving -> little investment on capital -> low returns -> low ICOR. Then again, the ICOR is a ratio, so even if both nominal investment and output are low, there is no guarantee that they're values are therefore low relative to each other, if anything the ICOR can easily be high, as explained in the two sources that claim the ICOR is high for such economies.

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  • $\begingroup$ Which is the source of the table? $\endgroup$ – luchonacho Apr 12 '17 at 14:36
  • $\begingroup$ @luchonacho the table comes from an A level Cambridge International Examination exam question. $\endgroup$ – user98937 Apr 12 '17 at 14:53
  • $\begingroup$ Capital-output ratio and incremental capital-output ratio are not the same. Indeed, the difference is explained in your second link. $\endgroup$ – Adam Bailey Apr 13 '17 at 12:30
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The key to the answer is good data on Capital. There is a project (KLEMS), which is computing harmonised (i.e. comparable) information on capital, labour, energy, etc for many countries. At the moment it has information mainly on developed countries, but data for more developing countries are coming up.

For example, this is a calculation of the capital-output ratio for the case of the UK:

enter image description here

For the case of developing countries, here is a figure:

enter image description here

(source here)

It seems that developing countries might have lower capital-output ratios. However, this is ultimately an empirical question which requires a proper analysis. I suggest you use the KLEMS data to make your own, harmonised study.

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