IDEAS home Printed from https://ideas.repec.org/a/spr/frecch/v5y2010i4p509-526.html
   My bibliography  Save this article

The causal relationship between equipment investment and infrastructures on economic growth in China

Author

Listed:
  • Maria Herrerias

    ()

Abstract

There is agreement in the literature on economic growth concerning the transitory effects of capital accumulation on the process of economic development. However, controversy arises if this effect is permanent. In this sense, the key point is the embodied technological progress and whether supply factors predominate among the determinants of capital accumulation. Only in this case should expect long-run effects of capital accumulation on economic growth. Inspired by this idea, I focus the study on two elements accounting for economic development—equipment investment and productive infrastructure and I also analyze the type of the empirical relationship that exists between them. The results indicate that equipment investment and infrastructures have played a significant role in accounting for long-run growth in China. However, I do not find empirical evidence supporting any relationship between the two types of investment. In addition, I find that foreign trade has stimulated output and equipment investment in the long run. Finally, it is found that innovation activities encourage equipment investment in the long run.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Maria Herrerias, 2010. "The causal relationship between equipment investment and infrastructures on economic growth in China," Frontiers of Economics in China, Springer;Higher Education Press, vol. 5(4), pages 509-526, December.
    • Handle: RePEc:spr:frecch:v:5:y:2010:i:4:p:509-526
    DOI: 10.1007/s11459-010-0110-4
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11459-010-0110-4
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Caselli, Francesco & Wilson, Daniel J., 2004. "Importing technology," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 1-32, January.
    2. Chuang, Yih-Chyi, 1998. "Learning by Doing, the Technology Gap, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 697-721, August.
    3. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
    4. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.
    5. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    6. David Alan Aschauer, 1988. "Government spending and the "falling rate of profit."," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 11-17.
    7. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
    8. Baldwin, Richard & Seghezza, Elena, 1996. "Trade-induced Investment-led Growth," CEPR Discussion Papers 1420, C.E.P.R. Discussion Papers.
    9. Fan, Shenggen & Zhang, Xiaobo, 2004. "Infrastructure and regional economic development in rural China," China Economic Review, Elsevier, vol. 15(2), pages 203-214.
    10. Katarina Juselius & Ronald MacDonald, 2000. "International Parity Relationships between Germany and the United States: A Joint Modelling Approach," Discussion Papers 00-10, University of Copenhagen. Department of Economics.
    11. Boileau, Martin, 2002. "Trade in capital goods and investment-specific technical change," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 963-984, June.
    12. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    13. J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 157-212.
    14. Horst Siebert, 2007. "China: Coming to Grips with the New Global Player," The World Economy, Wiley Blackwell, vol. 30(6), pages 893-922, June.
    15. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
    16. Dellas, Harris & Koubi, Vally, 2001. "Industrial Employment, Investment Equipment, and Economic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 49(4), pages 867-881, July.
    17. Temple, Jonathan & Voth, Hans-Joachim, 1998. "Human capital, equipment investment, and industrialization," European Economic Review, Elsevier, vol. 42(7), pages 1343-1362, July.
    18. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    19. María Jesús Herrerias & Vicente Orts, 2010. "Is the Export-led Growth Hypothesis Enough to Account for China's Growth?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(s1), pages 34-51.
    20. Alan J. Auerbach & Kevin A. Hassett & Stephen D. Oliner, 1994. "Reassessing the Social Returns to Equipment Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 789-802.
    21. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
    22. Robert E. Baldwin, 2004. "Openness and Growth: What's the Empirical Relationship?," NBER Chapters,in: Challenges to Globalization: Analyzing the Economics, pages 499-526 National Bureau of Economic Research, Inc.
    23. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 61-102.
    24. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July.
    25. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    26. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    27. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
    28. Juselius, Katarina & MacDonald, Ronald, 2004. "International parity relationships between the USA and Japan," Japan and the World Economy, Elsevier, vol. 16(1), pages 17-34, January.
    29. Esfahani, Hadi Salehi, 1991. "Exports, imports, and economic growth in semi-industrialized countries," Journal of Development Economics, Elsevier, vol. 35(1), pages 93-116, January.
    30. Carsten A. Holz, 2005. "OECD — China Governance Project: The Institutional Arrangements for the Production of Statistics," OECD Statistics Working Papers 2005/1, OECD Publishing.
    31. Phylaktis, Kate & Girardin, Eric, 2001. "Foreign exchange markets in transition economies: China," Journal of Development Economics, Elsevier, vol. 64(1), pages 215-235, February.
    32. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    33. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
    34. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
    35. Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
    36. Jordan Shan & Fiona Sun, 1998. "On the export-led growth hypothesis: the econometric evidence from China," Applied Economics, Taylor & Francis Journals, vol. 30(8), pages 1055-1065.
    37. Chow, Gregory C., 1987. "Money and price level determination in China," Journal of Comparative Economics, Elsevier, vol. 11(3), pages 319-333, September.
    38. Gregory C. Chow, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 809-842.
    39. An, Galina & Iyigun, Murat F., 2004. "The export technology content, learning by doing and specialization in foreign trade," Journal of International Economics, Elsevier, vol. 64(2), pages 465-483, December.
    40. Ricardo A. López, 2005. "Trade and Growth: Reconciling the Macroeconomic and Microeconomic Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 19(4), pages 623-648, September.
    41. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    42. Maria Jesus Herrerias & Vicente Orts, 2011. "The driving forces behind China’s growth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(1), pages 79-124, January.
    43. Madsen, Jakob B., 2002. "The causality between investment and economic growth," Economics Letters, Elsevier, vol. 74(2), pages 157-163, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sayef Bakari & Mohamed Mabrouki & Asma Elmakki, 2018. "The Impact of Domestic Investment in the Industrial Sector on Economic Growth with Partial Openness: Evidence from Tunisia," Economics Bulletin, AccessEcon, vol. 38(1), pages 111-128.
    2. repec:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-017-0054-0 is not listed on IDEAS

    More about this item

    Keywords

    China; openness; equipment investment; infrastructures; growth; F43; O40; O47; O53;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:frecch:v:5:y:2010:i:4:p:509-526. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.