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


  • 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.

Suggested Citation

  • Stiroh, K.J., 2000. "Investment and Productivity Growth - A Survey from the Neoclassical and New Growth Perspectives," Papers 24, Gouvernement du Canada - Industry Canada;Gouvernement du Canada - Industry Canada.
  • Handle: RePEc:fth:cagoip:24

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    Cited by:

    1. Petr Hanel, 2007. "Productivity and innovation: an overview of the issues," Cahiers de recherche 07-22, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    2. Concetta Castiglione, 2012. "Technical efficiency and ICT investment in Italian manufacturing firms," Applied Economics, Taylor & Francis Journals, vol. 44(14), pages 1749-1763, May.
    3. Tahir Abdi, 2008. "Machinery & equipment investment and growth: evidence from the Canadian manufacturing sector," Applied Economics, Taylor & Francis Journals, vol. 40(4), pages 465-478.

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    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - 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


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