Capital-goods prices and investment, 1870-1950

The relative price of capital goods, an important component of the user cost of capital, has rarely been incorporated into comparative studies of long-run capital accumulation. This article constructs and explores a data set for capital-goods and equipment prices covering the 1870-1950 period for 11 OECD countries. We document substantial differences across countries in the relative prices of capital goods, but also find convergence in those prices over time. Finally, we show that relative capital-goods prices are strongly negatively correlated with investment rates.