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

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  • 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.
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  • 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
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    More about this item

    Keywords

    China; openness; equipment investment; infrastructures; growth; F43; O40; O47; O53;
    All these keywords.

    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

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