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Adapting the Extended Solow Model: The Impact of Output Determinants on Economic Growth in Peru from 2000 to 2022

Author

Listed:
  • Alejandro Paredes-Soria

    (Graduate School, Federico Villarreal National University, Lima 15088, Peru)

  • Alejandro Saúl Paredes-Egúsquiza

    (Graduate School, Private University of the North, Lima 15083, Peru)

  • Juan Alberto Villagómez-Chinchay

    (Faculty of Accounting Sciences, National University of San Marcos, Lima 15081, Peru)

  • Jorge Luis De Velazco Borda

    (Faculty of Accounting Sciences, National University of San Marcos, Lima 15081, Peru)

  • Jorge Miguel Chávez-Díaz

    (Faculty of Accounting Sciences, National University of San Marcos, Lima 15081, Peru)

Abstract

The present study seeks to analyze the impact of the externalities of investments in infrastructure on economic growth in Peru during the period 2000–2022. The methodology used is quantitative, with a non-experimental and longitudinal design, based on the Solow model, using VAR and VEC to analyze the relationship between investment in infrastructure and economic growth in Peru (2000–2022). The results indicate that the coefficient of variation in private income and the labor force is significantly and positively explained by GDP with an adjusted R2 of 0.94 that explains the variability of the model. It was found that investments in infrastructure and labor have a positive and significant impact on GDP. It is concluded that investments in infrastructure, especially private ones, have had a positive and significant impact on the economic growth of Peru during the period 2000–2022. These investments have acted as a key driver for the recovery and increase in GDP and thus the reduction in unemployment, while externalities, such as improvements in connectivity and productivity, have been fundamental for strengthening long-term economic development.

Suggested Citation

  • Alejandro Paredes-Soria & Alejandro Saúl Paredes-Egúsquiza & Juan Alberto Villagómez-Chinchay & Jorge Luis De Velazco Borda & Jorge Miguel Chávez-Díaz, 2025. "Adapting the Extended Solow Model: The Impact of Output Determinants on Economic Growth in Peru from 2000 to 2022," JRFM, MDPI, vol. 18(3), pages 1-22, February.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:112-:d:1596545
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    References listed on IDEAS

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    1. Yanqing Jiang & Yunliang Jiang & Jinghai Zheng, 2020. "Investment in Infrastructure and Regional Growth in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(9), pages 1942-1956, July.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Xin Du & Hengming Zhang & Yawen Han, 2022. "How Does New Infrastructure Investment Affect Economic Growth Quality? Empirical Evidence from China," Sustainability, MDPI, vol. 14(6), pages 1-30, March.
    4. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
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