Impact of imported intermediate and capital goods on economic growth: A Cross country analysis
AbstractKnowledge accumulation in the richer countries provides them with comparative advantages in higher productivity products. The countries that import the higher productivity intermediate products and capital equipments produced in the richer countries, however, derive benefits from knowledge spillovers. The empirical analysis in this paper shows that what type of intermediate goods and capital equipments a country imports and from where it imports indeed matters for its long-run growth. Using highly disaggregated trade data for a large number of countries, we construct an index (denoted as IMPY) that measures the productivity level associated with a country's imports. Using instrumental variable method (to address the endogeneity problems), we find that a higher initial value of the IMPY index (for the year 1995) leads to a faster growth rate of income per capita in the subsequent years (during 1995-2005) and vice versa. The results imply that a 10 increase in IMPY increases growth by about 1.3 to 1.9 percentage points, which is quite large.
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Bibliographic InfoPaper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2008-029.
Length: 30 pages
Date of creation: Dec 2008
Date of revision:
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More information through EDIRC
Imports; Intermediate and Capital Goods; Economic Growth; Productivity;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
- NEP-DEV-2009-02-22 (Development)
- NEP-EFF-2009-02-22 (Efficiency & Productivity)
- NEP-OPM-2009-02-22 (Open Economy Macroeconomic)
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