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Capital Goods Imports and Long-Run Growth

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  • Jong-Wha Lee

Abstract

This paper presents an endogenous growth model of an open economy in which the growth rate of income is higher if foreign capital goods are used relatively more than domestic capital goods for the production of capital stock. Empirical results, using cross country data for the period 1960-85, confirm that the ratio of imported to domestically produced capital goods in the composition of investment has a significant positive effect on per capita income growth rates across countries, in particular, in developing countries. Hence, the composition of investment in addition to the volume of total capital accumulation is highlighted as an important determinant of economic growth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4725.

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Date of creation: Apr 1994
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Publication status: published as Journal of Development Economics, Vol. 48, no. 1 (1995): 91-110.
Handle: RePEc:nbr:nberwo:4725

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  1. Roubini, N. & Sala-I-Martin, X., 1991. "Financial development , the Trade Regime and Economic Growth," Papers, Yale - Economic Growth Center 646, Yale - Economic Growth Center.
  2. Jong-Wha Lee, 1993. "International Trade, Distortions, and Long-Run Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 40(2), pages 299-328, June.
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  19. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
  20. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 531-55, May.
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