Equipment Investment and Economic Growth

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Published in RePEc

Abstract

Using data from the United Nations Comparison Project and the Penn World Table, we find that machinery and equipment investment has a strong association with growth: over 1960–1985 each extra percent of GDP invested in equipment is associated with an increase in GDP growth of one third of a percentage point per year. This is a much stronger association than found between growth and any of the other components of investment. A variety of considerations suggest that this association is causal, that higher equipment investment drives faster growth, and that the social return to equipment investment in well-functioning market economies is on the order of 30 percent per year. (This abstract was borrowed from another version of this item.)

Keywords

GDP
MACHINERY
TABLE
FUNCTIONING
ECONOMIES
PENN
ITEM
EQUIPMENT INVESTMENT

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Version 1, RePEc

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