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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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  1. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  2. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  3. 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.
  4. Romer, Paul M, 1996. "Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 202-06, May.
  5. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  6. Auerbach, Alan J & Hassett, Kevin A & Oliner, Stephen D, 1994. "Reassessing the Social Returns to Equipment Investment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 789-802, August.
  7. James G. MacKinnon & Halbert White, 1983. "Some Heteroskedasticity Consistent Covariance Matrix Estimators with Improved Finite Sample Properties," Working Papers, Queen's University, Department of Economics 537, Queen's University, Department of Economics.
  8. John Page, 1994. "The East Asian Miracle: Four Lessons for Development Policy," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1994, Volume 9, pages 219-282 National Bureau of Economic Research, Inc.
  9. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, American Economic Association, vol. 85(1), pages 116-33, March.
  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, MIT Press, vol. 105(2), pages 501-26, May.
  12. De Long, J. Bradford, 1992. "Productivity Growth and Machinery Investment: A Long-Run Look, 1870–1980," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 52(02), pages 307-324, June.
  13. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, 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, University of Munich, Department of Economics 19619, University of Munich, Department of Economics.
  2. Carlos Esteban Posada & Jorge Andres Tamayo, . "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 534, Banco de la Republica de Colombia.
  3. Uwe Dulleck & Neil Foster, 2007. "Imported Equipment, Human Capital and Economic Growth in Developing Countries," NCER Working Paper Series, National Centre for Econometric Research 16, National Centre for Econometric Research.
  4. Maloney, William F. & Caicedo, Felipe Valencia, 2014. "Engineers, Innovative Capacity and Development in the Americas," Policy Research Working Paper Series, The World Bank 6814, The World Bank.
  5. Sylvain Dessy & Flaubert Mbiekop & Stéphane Pallage, 2005. "On the Mechanics of Trade-Induced Structural Transformation," Cahiers de recherche, CIRPEE 0529, CIRPEE.
  6. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, Springer, vol. 42(1), pages 181-207, February.
  7. Giorgia Barboni & Tania Treibich, 2010. "On the Latin American Growth Paradox: A Hindsight into the Golden Age," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2010-35, Observatoire Francais des Conjonctures Economiques (OFCE).
  8. Tiago Neves Sequeira, 2003. "Human Capital Composition, Growth and Development in an R&D Endogenous Growth Model," Macroeconomics, EconWPA 0310015, EconWPA.
  9. Pedro Lains, 2008. "The Portuguese Economy in the Irish Mirror, 1960–2004," Open Economies Review, Springer, Springer, vol. 19(5), pages 667-683, November.
  10. Temple, Jonathan, 1999. "A positive effect of human capital on growth," Economics Letters, Elsevier, Elsevier, vol. 65(1), pages 131-134, October.
  11. 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.
  12. Maria Herrerias, 2010. "The causal relationship between equipment investment and infrastructures on economic growth in China," Frontiers of Economics in China, Springer, Springer, vol. 5(4), pages 509-526, December.
  13. 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, Elsevier, vol. 47(4), pages 369-380, October.

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