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Human capital, equipment investment, and industrialization

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  • Temple, Jonathan
  • Voth, Hans-Joachim

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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  • Temple, Jonathan & Voth, Hans-Joachim, 1998. "Human capital, equipment investment, and industrialization," European Economic Review, Elsevier, vol. 42(7), pages 1343-1362, July.
  • Handle: RePEc:eee:eecrev:v:42:y:1998:i:7:p:1343-1362
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    2. Carlos Esteban Posada & Jorge Andres 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 534, Banco de la Republica de Colombia.
    3. Pedro Lains, 2008. "The Portuguese Economy in the Irish Mirror, 1960–2004," Open Economies Review, Springer, vol. 19(5), pages 667-683, November.
    4. Tiago Neves Sequeira, 2003. "Human Capital Composition, Growth and Development in an R&D Endogenous Growth Model," Macroeconomics 0310015, University Library of Munich, Germany.
    5. Temple, Jonathan, 1999. "A positive effect of human capital on growth," Economics Letters, Elsevier, vol. 65(1), pages 131-134, October.
    6. William F. Maloney & Felipe Valencia Caicedo, 2017. "Engineering Growth: Innovative Capacity and Development in the Americas," CESifo Working Paper Series 6339, CESifo.
    7. Ricardo A. López, 2009. "Do Firms Increase Productivity in Order to Become Exporters?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 621-642, October.
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    9. Maurizio Polato & Josanco Floreani & Andrea Paltrinieri & Flavio Pichler, 2016. "Religion, governance and performance: evidence from Islamic and conventional stock exchanges," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(3), pages 591-623, September.
    10. Maria Jesus Herrerias, 2010. "The Causal Relationship between Equipment Investment and Infrastructures on Economic Growth in China," Frontiers of Economics in China, Higher Education Press, vol. 5(4), pages 509-526, December.
    11. Gillman, Max, 2021. "Steps in industrial development through human capital deepening," Economic Modelling, Elsevier, vol. 99(C).
    12. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Journal of Economic Growth, Springer, vol. 11(3), pages 187-228, September.
    13. Jakob B. Madsen, 2005. "A Century Of Economic Growth: The Social Returns To Investment In Equipment And Structures," Manchester School, University of Manchester, vol. 73(1), pages 101-122, January.
    14. 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.
    15. 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).
    16. Gabriele Cappelli & Jörg Baten, 2017. "European Trade, Colonialism and Human Capital Accumulation in Senegal, Gambia and Western Mali, 1770 - 1900," CESifo Working Paper Series 6468, CESifo.
    17. Edgar Cruz, 2019. "Kuznets meets Lucas: structural change and human capital," Oxford Economic Papers, Oxford University Press, vol. 71(4), pages 848-873.
    18. Shimaa Elkomy & Hilary Ingham & Robert Read, 2021. "The Impact of Foreign Technology and Embodied R&D on Productivity in Internationally Oriented and High-Technology Industries in Egypt, 2006–2009," Journal of Industry, Competition and Trade, Springer, vol. 21(2), pages 171-192, June.
    19. Shimaa Elkomy & Hilary Ingham & Robert Read, 2020. "The Impact of Foreign Technology & Embodied R&D On Productivity in Internationally-Oriented & High-Technology Industries in Egypt, 2006-2009," Working Papers 293574925, Lancaster University Management School, Economics Department.
    20. Dulleck, Uwe & Foster, Neil, 2008. "Imported Equipment, Human Capital and Economic Growth in Developing Countries," Economic Analysis and Policy, Elsevier, vol. 38(2), pages 233-250, September.
    21. 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.
    22. Maloney, William F. & Valencia, Felipe Caicedo, 2014. "Engineers, Innovative Capacity and Development in the Americas," IZA Discussion Papers 8271, Institute of Labor Economics (IZA).
    23. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.

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