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Why does the productivity of investment vary across countries?

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  • Kevin S. Nell

    (University of Johannesburg)

  • A.P. Thirlwall

    (University of Kent)

Abstract

In 'new growth theory' equations that include the investment ratio, all other variables included are determinants of the productivity of investment. We convert a new growth theory equation into a productivity of investment equation by dividing the equation through by the investment ratio. We take a sample of 84 developed and developing countries over the period 1980 to 2011, and examine the importance of 19 potential variables that might affect the productivity of investment, using a general-to-specific model selection algorithm. Education, export growth, macroeconomic stability, political rights, geography and government expenditure turn out to be the most important determinants. There is no evidence of diminishing returns to investment, so that investment matters for long run growth.

Suggested Citation

  • Kevin S. Nell & A.P. Thirlwall, 2017. "Why does the productivity of investment vary across countries?," PSL Quarterly Review, Economia civile, vol. 70(282), pages 213-245.
    • Handle: RePEc:psl:pslqrr:2017:31
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/14005/13760
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    References listed on IDEAS

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    1. A.P. Thirlwall, 2018. "Una vita nell’economia," Moneta e Credito, Economia civile, vol. 71(283), pages 179-210.
    2. Kevin S. Nell & A.P. Thirlwall, 2017. "Perche' la produttivita' degli investimenti varia tra paesi? (Why does the productivity of investment vary across countries?)," Moneta e Credito, Economia civile, vol. 70(279), pages 197-231.
    3. Nell, Kevin, 2023. "Inflation and growth in developing economies: A tribute to Professor Thirlwall," MPRA Paper 118757, University Library of Munich, Germany, revised 01 Sep 2023.
    4. Nicholas Apergis & Chi Keung Lau, 2022. "Hotel Revenue Convergence: Evidence Across Star Hotels in Chinese Provinces," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 50(1), pages 37-51, June.

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