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Investment rates and the aggregate production function

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  • García-Belenguer, Fernando
  • Santos, Manuel S.

Abstract

In this paper we consider a simple version of the neoclassical growth model, and carry out an empirical analysis of the main determinants of aggregate investment across countries. The neoclassical growth model predicts that aggregate investment may be influenced by income growth, the capital income share, the relative price of capital, taxes, and other market distortions. We check these investment patterns for both OECD and non-OECD countries. We also decompose investment data into equipment and structures, and explore major factors affecting their relative prices. These empirical exercises shed light into the shape of the neoclassical production function.

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  • García-Belenguer, Fernando & Santos, Manuel S., 2013. "Investment rates and the aggregate production function," European Economic Review, Elsevier, vol. 63(C), pages 150-169.
    • Handle: RePEc:eee:eecrev:v:63:y:2013:i:c:p:150-169
    DOI: 10.1016/j.euroecorev.2013.06.007
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    4. López, Ramón & Islam, Asif, 2011. "Fiscal spending for economic growth in the presence of imperfect markets," CEPR Discussion Papers 8709, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    Aggregate investment; Aggregate production function; Relative price of investment; Factor income shares; Market distortions;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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