How To Determine The Capital Output Ratio (COR)?


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Muhammad Abdullah786 Profile
COR also dependents upon the availability of natural resources in the country. A country which is abundant in natural resources has a low COR because it can substitute the natural resources of capital. In other words, the resources rich country in order to boost output cans utilize the resources rather capital. As the case of china, Norway is known as very high capital out-put ratio country because she is not endowed with natural resources.
The amount of capital employed in a country is an important factor which determines the size of COR. If the average life of capital is assumed constant, then COR is determined by the proportion of national income invested annually.

The technical progress and innovations also determine the COR. If the technology development is such a nature that capital is employed intensively, the COR will rise. On the other hand, the countries which employ relatively more labor in the process of production, the value of COR will be low.

COR also depends upon the rate of investment. The higher the rate of new investment, the higher is COR. A country which doubles its capital in 10 years will have a higher output per unit of capital than a country which doubles it in 20 years.

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