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Equipment Investment and Growth In Developing Countries

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Author Info
Hendricks, Lutz A.

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Abstract

Abstract Currently Unavailable. Differences in equipment investment or equipment prices account for large variations in growth rates across countries. An important task is to understand the economic mechanism underlying the equipment-growth nexus and its policy implications. In order to study this issue, this paper develops a model in which growth is driven by the adoption of technologies that are embodied in equipment. I show that this model can quantitatively account for the observed cross-country relationships between equipment investment, equipment prices, and growth. I find that the competitive equilibrium is characterized by inefficiently low levels of learning and too slow growth and study which policies are able to remedy this inefficiency.

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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 11932.

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Date of creation: 05 May 2004
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Publication status: Published in Journal of Development Economics, 2000, Vol. 61, No. 2, pp. 335-364.
Handle: RePEc:isu:genres:11932

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. De Long, J. Bradford & Summers, Lawrence H., 1993. "How strongly do developing economies benefit from equipment investment?," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 395-415, December. [Downloadable!] (restricted)
  2. Warner, Andrew M, 1992. "Did the Debt Crisis Cause the Investment Crisis?," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1161-86, November. [Downloadable!] (restricted)
    Other versions:
  3. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September. [Downloadable!] (restricted)
  4. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
  5. Robert M. Coen, 1980. "Alternative Measures of Capital and Its Rate of Return in United States Manufacturing," NBER Chapters, in: The Measurement of Capital, pages 121-152 National Bureau of Economic Research, Inc. [Downloadable!]
  6. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April. [Downloadable!] (restricted)
  7. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August. [Downloadable!] (restricted)
  9. Feldstein, Martin S & Foot, David K, 1971. "The Other Half of Gross Investment: Replacement and Modernization Expenditures," The Review of Economics and Statistics, MIT Press, vol. 53(1), pages 49-58, February. [Downloadable!] (restricted)
  10. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December. [Downloadable!] (restricted)
  12. Zvi Griliches, 1992. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Allan Young & John C. Musgrave, 1980. "Estimation of Capital Stock in the United States," NBER Chapters, in: The Measurement of Capital, pages 23-82 National Bureau of Economic Research, Inc. [Downloadable!]
  14. Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander, 1995. "North-South R&D Spillovers," CEPR Discussion Papers 1133, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-83, August. [Downloadable!] (restricted)
  16. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June. [Downloadable!] (restricted)
    Other versions:
  18. Jong-Wha Lee, 1994. "Capital Goods Imports and Long-Run Growth," NBER Working Papers 4725, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1992-2), pages 157-212. [Downloadable!]
  20. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May. [Downloadable!] (restricted)
  21. Boyan Jovanovic & Rafael Rob, 1997. "Solow vs. Solow: Machine Prices and Development," NBER Working Papers 5871, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  22. Peter Klenow, 1998. "Learning Curves and the Cyclical Behavior of Manufacturing Industries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 531-550, April. [Downloadable!] (restricted)
  23. Andres Rodriguez-Clare, 1996. "The role of trade in technology diffusion," Discussion Paper / Institute for Empirical Macroeconomics 114, Federal Reserve Bank of Minneapolis. [Downloadable!]
  24. Pack, Howard, 1988. "Industrialization and trade," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 9, pages 333-380 Elsevier. [Downloadable!] (restricted)
  25. Sebastian Edwards, 1997. "Openness, Productivity and Growth: What Do We Really Know?," NBER Working Papers 5978, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Xavier Mateos-Planas, 2001. "Schooling and Distortions in a Vintage Capital Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 127-158, January. [Downloadable!] (restricted)
    Other versions:
  2. Dulleck, Uwe & Foster, Neil, 2008. "Imported Equipment, Human Capital and Economic Growth in Developing Countries," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 38(2), pages 233-250, September. [Downloadable!]
    Other versions:
  3. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2008. "Investment-Specific Technological Change, Investment Sectoral Allocation and Human Capital Accumulation in a Model of Export-Led Growth," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211332520, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  4. Varouj Aivazian & Dipak Mazumdar & Eric Santor, 2003. "Financial Constraints and Investment: Assessing the Impact of a World Bank Loan Program on Small and Medium-Sized Enterprises in Sri Lanka," Working Papers 03-37, Bank of Canada. [Downloadable!]
  5. Arvind Virmani, 2004. "Sources of India's economic growth: trends in total factor productivity," Indian Council for Research on International Economic Relations, New Delhi Working Papers 131, Indian Council for Research on International Economic Relations, New Delhi, India. [Downloadable!]
  6. Berthold Herrendorf & Arilton Teixeira, . "Barriers to Entry and Development," Working Papers 2167726, Department of Economics, W. P. Carey School of Business, Arizona State University. [Downloadable!]
  7. Agenor, Pierre-Richard, 2003. "The mini-integrated macroeconomic model for poverty analysis : a framework for analyzing the unemployment and poverty effects of fiscal and labor market reforms," Policy Research Working Paper Series 3067, The World Bank. [Downloadable!]
  8. Arvind Virmani, 2004. "India's economic growth: From socialist rate of growth to Bharatiya rate of growth," Indian Council for Research on International Economic Relations, New Delhi Working Papers 122, Indian Council for Research on International Economic Relations, New Delhi, India. [Downloadable!]
  9. Stephen L. Parente, 2000. "Learning-by-Using and the Switch to Better Machines," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 675-703, October. [Downloadable!] (restricted)
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