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Human capital, equipment investment, and industrialization

  • Temple, Jonathan
  • Voth, Hans-Joachim

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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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 42 (1998)
Issue (Month): 7 (July)
Pages: 1343-1362

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Handle: RePEc:eee:eecrev:v:42:y:1998:i:7:p:1343-1362
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
  2. 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.
  3. 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.
  4. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  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. 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.
  7. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, vol. 85(1), pages 116-33, March.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
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