Capital-Output Ratio

Capital-Output Ratio 

the value of fixed production assets per unit of output. In socialist economies, the capital-output ratio is used in economic analysis and in formulating production and capital construction plans for the national economy as a whole and for individual sectors and enterprises (associations). Data on the gross social product and the produced national income can be used to analyze the capital-output ratio of the national economy, while data on gross (market) or net output can be used to analyze the ratios of individual sectors.

A distinction is made between the direct and the full capital-output ratio. The direct ratio is calculated as the ratio of the fixed assets of a given sector to that sector’s output in monetary terms. The full capital-output ratio takes into account not only the fixed assets that are directly involved in the output of a sector but also the assets functioning in sectors that figure indirectly in production. Coefficients of the full capital-output ratio were calculated for the first time during the preparation of the intersectorial balance sheet for 1966 of the national economy’s fixed capital stock. The relationship between the full and direct capital-output ratios varies from sector to sector; it is determined by the nature of production and of intersectorial relations. The direct capital-output ratio is inversely proportional to capital productivity.

L. E. BABASHKIN