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Investment and Productivity Growth - A Survey from the Neoclassical and New Growth Perspectives

Listed author(s):
  • Stiroh, K.J.

This paper reviews the wide literature on investment and productivity with the debate between the neoclassical and the new growth theories providing a context for discussion. Both schools of thought regard investment, broadly defined to include purchases of tangible assets, human capital expenditures, research and development efforts, etc., as the fundamental source of improved productivity and economic growth, but the two views diverge on the exact transmission mechanism. Most importantly, the neoclassical framework focuses on internal returns to investors who appropriate the benefits of new investment, while new growth models emphasize external effects as productivity gains spill over to others. This crucial dichotomy leads to differences regarding the role of investment as a source of growth, policy prescriptions, and implications for long-run gains in productivity and living standards. The paper then reviews several empirical and conceptual issues relating to investment and productivity and outlines areas for future research.

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Paper provided by Gouvernement du Canada - Industry Canada & Gouvernement du Canada - Industry Canada in its series Papers with number 24.

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Length: 62 pages
Date of creation: 2000
Handle: RePEc:fth:cagoip:24
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Canada; Industry Canada, Publications Officer, Micro-Economic Policy Analysis, Industry Canada 5th Floor, West Tower 235 Queen Street, Ottawa Ontario K1A 0H5

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