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Trading capital goods: Is it better to prioritize domestic capital goods production?

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  • Jarrett, Uchechukwu
  • Saha, Sujata

Abstract

We investigate the growth effects of practices that either emphasize or de-emphasize the accumulation of imported capital goods compared to domestically produced capital goods. We find that an increased reliance on imported capital goods yielded lower aggregate growth, when compared to complementing practices where neither capital good source is prioritized and practices that increased reliance on domestic capital goods. Further investigation reveals a preference for complementing practices over a reliance on domestic capital goods only in low-income countries but the superiority of an increased reliance on domestic capital goods prevails everywhere else.

Suggested Citation

  • Jarrett, Uchechukwu & Saha, Sujata, 2026. "Trading capital goods: Is it better to prioritize domestic capital goods production?," Research in Economics, Elsevier, vol. 80(1).
    • Handle: RePEc:eee:reecon:v:80:y:2026:i:1:s1090944326000025
    DOI: 10.1016/j.rie.2026.101112
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    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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