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Equipment Investment and Growth In Developing Countries

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  • Hendricks, Lutz A.

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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Bibliographic 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: 01 Jan 2000
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Publication status: Published in Journal of Development Economics 2000, vol. 61, 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
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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References

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  1. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May.
  2. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  3. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
  4. 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.
  5. 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.
  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.
  7. Zvi Griliches, 1998. "The Search for R&D Spillovers," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 251-268 National Bureau of Economic Research, Inc.
  8. Boyan Jovanovic & Rafael Rob, 1997. "Solow vs. Solow: Machine Prices and Development," NBER Working Papers 5871, National Bureau of Economic Research, Inc.
  9. Andrew M. Warner, 1991. "Did the debt crisis cause the investment crisis?," International Finance Discussion Papers 418, Board of Governors of the Federal Reserve System (U.S.).
  10. Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander, 1995. "North-South R&D Spillovers," CEPR Discussion Papers 1133, C.E.P.R. Discussion Papers.
  11. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  12. 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(2), pages 157-212.
  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.
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  18. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
  19. Andres Rodriguez-Clare, 1996. "The role of trade in technology diffusion," Discussion Paper / Institute for Empirical Macroeconomics 114, Federal Reserve Bank of Minneapolis.
  20. 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.
  21. Robert E Lucas, 1999. "Making a Miracle," Levine's Working Paper Archive 2101, David K. Levine.
  22. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-98, March.
  23. 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.
  24. 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.
  25. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
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  27. 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.
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Citations

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Cited by:
  1. Bender, Dieter & Loewenstein, Wilhelm, 2014. "Immiserizing Capital Flows to Developing Countries," IEE Working Papers 201, Institut fuer Entwicklungsforschung und Entwicklungspolitik, Ruhr-Universitaet Bochum.
  2. repec:fth:sotoec:0030 is not listed on IDEAS
  3. 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.
  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.
  5. Berthold Herrendorf & Arilton Teixeira, 2011. "Barriers To Entry And Development," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 573-602, 05.
  6. 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.
  7. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.
  8. Araujo, Ricardo Azevedo & Lima, Gilberto Tadeu, 2011. "Embodied technological change, capital sectoral allocation and export-led growth," MPRA Paper 29810, University Library of Munich, Germany.
  9. Mateos-Planas, Xavier, 2004. "Technology adoption with finite horizons," Journal of Economic Dynamics and Control, Elsevier, vol. 28(11), pages 2129-2154, October.
  10. 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].
  11. Araujo, Ricardo Azevedo, 2011. "Lyapunov Stability in an Evolutionary Game Theory Model of the Labor Market," MPRA Paper 29957, University Library of Munich, Germany.
  12. 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.
  13. 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.
  14. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2012. "Capital-Specific Technological Change and Human Capital Accumulation in a Model of Export-Led Growth," PSL Quarterly Review, Economia civile, vol. 65(262), pages 275-311.
  15. 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.
  16. 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.

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