Are differences in capital composition related to differences in per capita income?
Per capita income, like capital composition, differs enormously across nations. For example, according to one measure used by the World Bank, in 2001, per capita income in the U.S. was 65 times that of Tanzania. The question then arises: Is capital composition correlated with per capita income? The answer is yes. Caselli and Wilson examined data on several broad types of capital for 118 countries in 1995; for each country, they calculated the correlation between its per capita income and each capital type’s share of total capital (as reflected by imports). Figure 1 presents a summary of the results. Computers and related equipment have the highest correlation with per capita income; professional goods, electrical equipment, communications equipment, and aircraft also are positively correlated. In contrast, non-electrical equipment, fabricated metal products, motor vehicles, and other transportation equipment are negatively related to income. These correlations between capital compositi
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