Capital-scarce countries face challenges attracting investment despite high returns.
The study looked at how the return on investments in countries with limited capital compares to those with more capital. They found that in countries with less capital, the value of each additional unit of capital is higher. However, the actual financial returns on investments are similar in both types of countries. This suggests that there may not be much motivation for investors to put their money into capital-scarce countries. The researchers think that obstacles to accumulating capital within a country, like high costs of adjusting capital, could be causing this disconnect between the value of capital and financial returns.