Equipment Investment and Economic Growth
Using data from the United Nations Comparison Project and the Penn World Table, we find that machinery and equipment investment has a strong association with growth: over 1960–1985 each extra percent of GDP invested in equipment is associated with an increase in GDP growth of one third of a percentage point per year. This is a much stronger association than found between growth and any of the other components of investment. A variety of considerations suggest that this association is causal, that higher equipment investment drives faster growth, and that the social return to equipment investment in well-functioning market economies is on the order of 30 percent per year.
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Volume (Year): 106 (1991)
Issue (Month): 2 ()
Pages: 445-502
| Handle: | RePEc:oup:qjecon:v:106:y:1991:i:2:p:445-502. |
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