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The Price of Capital in the Ak Model

The AK model predicts that the growth rate of income and the investment rate should move in lockstep. Jones (1995) rejected such an empirical regularity, but under the implicit premise that the price of capital is constant. I propose a parsimonious methodology to adjust the investment rate for the variations in the price of capital and use such a methodology to test the AK model using data on fifty countries during the period 1950-2000. Contrary to Jones, I fail to reject the prediction of the model in the majority of the cases, but the frequency of rejections is only marginally affected by the variations in the price of capital.