Tech · Brookings AI
What’s the marginal product of capital in developing countries?
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Financial officials are meeting in Washington, D.C., for the Spring meetings of the World Bank and the International Monetary Fund (IMF) between April 13 and 18, 2026.
Key facts
- Financial officials are meeting in Washington, D.C., for the Spring meetings of the World Bank and the International Monetary Fund (IMF) between April 13 and 18, 2026
- IBRD has had a 0.7% annual default rate and an economic loss (no interest is charged during nonaccrual) estimated at 9.6% for each default, implying a total loss of less than 0.1% of its lending
- Only two countries, Eritrea and Zimbabwe, are currently in arrears to IDA, putting the share of loans in nonaccrual status at approximately 0.4% as of end-2025
- For comparison, the MPK for a developed country like the United States averages around 13% using this methodology
Summary
The estimated marginal product of capital (MPKs) in developing countries are consistently high and provide a sound basis for multilateral development banks (MDBs) to finance investments. High returns persist even in environments with weak institutions, governance challenges, and limited complementary inputs, such as human capital and total factor productivity (TFP). Private capital is sensitive to risk and frictional costs as well as to MPK returns. MDBs play a catalytic role in reducing frictions and risks.