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Growth and investment across countries

  • Jess Benhabib
  • Mark M. Spiegel

This paper examines the channels through which country characteristics affect growth. We investigate whether "primitives," or rates of factor accumulation, are sufficient statistics for economic growth, and whether "ancillary variables," such as political instability, income distribution, and financial development, affect growth by influencing levels of investment in physical and human capital. Our results suggest that financial development is an important determinant of both total factor productivity growth and levels of investment. Political instability is also found to influence levels of physical capital accumulation. However, the impact of many of the ancillary variables on levels of investment are not very robust to the inclusion of country fixed effects.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 97-03.

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Date of creation: 1997
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Handle: RePEc:fip:fedfap:97-03
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