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Human capital, equipment investment, and industrialization

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  • Jonathan Temple
  • Hans-Joachim Voth

Abstract

This paper constructs simple models in which industrialization is driven by human capital accumulation. Industrialization can explain the robust correlation between equipment investment and growth in developing countries. We show that government intervention is justified within our stylized model, and indicate that a subsidy to equipment investment is likely to be dominated by other policies. In the final section of the paper, we examine the correlation between equipment investment and growth, and find that it is strongest in economies on the brink of industrialization. We also show that this result is not easily explained by diminishing returns.

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File URL: http://www.nuff.ox.ac.uk/economics_wp/w22/human.zip
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 22 & 116.

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Date of creation: Jul 1996
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Handle: RePEc:nuf:econwp:0022

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Web page: http://www.nuff.ox.ac.uk/economics/

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References

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  1. J. Bradford De Long & Lawrence H. Summers, . "Equipment Investment and Economic Growth," J. Bradford De Long's Working Papers _122, University of California at Berkeley, Economics Department.
  2. Marvin Goodfriend & John McDermott, 1994. "Early development," Working Paper 94-02, Federal Reserve Bank of Richmond.
  3. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
  4. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  5. Romer, Paul M, 1996. "Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth," American Economic Review, American Economic Association, vol. 86(2), pages 202-06, May.
  6. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  7. De Long, J. Bradford, 1992. "Productivity Growth and Machinery Investment: A Long-Run Look, 1870–1980," The Journal of Economic History, Cambridge University Press, vol. 52(02), pages 307-324, June.
  8. John Page, 1994. "The East Asian Miracle: Four Lessons for Development Policy," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 219-282 National Bureau of Economic Research, Inc.
  9. Alan J. Auerbach & Kevin A. Hassett & Stephen D. Oliner, 1993. "Reassessing the Social Returns to Equipment Investment," NBER Working Papers 4405, National Bureau of Economic Research, Inc.
  10. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
  11. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  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. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
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Citations

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Cited by:
  1. Temple, Jonathan & Wößmann, Ludger, 2006. "Dualism and cross-country growth regressions," Munich Reprints in Economics 19619, University of Munich, Department of Economics.
  2. Kathavate, Jay, 2013. "Direct & Indirect Effects of Aid Volatility on Growth: Do Stronger Institutions Play a Role?," MPRA Paper 45187, University Library of Munich, Germany.
  3. der Beek, Karine van, 2010. "The effects of political fragmentation on investments: A case study of watermill construction in medieval Ponthieu, France," Explorations in Economic History, Elsevier, vol. 47(4), pages 369-380, October.
  4. Uwe Dulleck & Neil Foster, 2007. "Imported Equipment, Human Capital and Economic Growth in Developing Countries," NCER Working Paper Series 16, National Centre for Econometric Research.
  5. Carlos Esteban Posada & Jorge Andrés Tamayo, 2008. "La transición hacia una economía urbana y el aumento del producto per cápita: el caso colombiano del siglo XX desde la perspectiva de Lucas," BORRADORES DE ECONOMIA 005111, BANCO DE LA REPÚBLICA.
  6. Tiago Neves Sequeira, 2003. "Human Capital Composition, Growth and Development in an R&D Endogenous Growth Model," Macroeconomics 0310015, EconWPA.
  7. Maria Herrerias, 2010. "The causal relationship between equipment investment and infrastructures on economic growth in China," Frontiers of Economics in China, Springer, vol. 5(4), pages 509-526, December.
  8. Temple, Jonathan, 1999. "A positive effect of human capital on growth," Economics Letters, Elsevier, vol. 65(1), pages 131-134, October.
  9. Sylvain Dessy & Flaubert Mbiekop & Stéphane Pallage, 2005. "On the Mechanics of Trade-Induced Structural Transformation," Cahiers de recherche 0529, CIRPEE.
  10. Giorgia Barboni & Tania Treibich, 2010. "On the Latin American Growth Paradox: A Hindsight into the Golden Age," Documents de Travail de l'OFCE 2010-35, Observatoire Francais des Conjonctures Economiques (OFCE).
  11. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.
  12. Pedro Lains, 2008. "The Portuguese Economy in the Irish Mirror, 1960–2004," Open Economies Review, Springer, vol. 19(5), pages 667-683, November.
  13. Maloney, William F. & Caicedo, Felipe Valencia, 2014. "Engineers, Innovative Capacity and Development in the Americas," Policy Research Working Paper Series 6814, The World Bank.

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