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Equipment Investment and Economic Growth

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  • J. Bradford De Long
  • Lawrence H. Summers

Abstract

Using data from the United Nations Comparison Project and the Penn World Table, we find that machinery and equipment investment has a strong association with growth: over l9&)?l95 each percent of GDP invested in equipment is associated with an increase in GDP growth of 1/3 a percentage point per year. This is a much stronger association than found between growth and any of the other components of investment. A variety of considerations suggest that this association is causal, that higher equipment investment drives faster growth, and that the social return to equipment investment in well functioning market economies is on the order of 30 percent per year.

Suggested Citation

  • J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3515
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    References listed on IDEAS

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    7. Dale W. Jorgenson, 1991. "Productivity and Economic Growth," NBER Chapters,in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 19-118 National Bureau of Economic Research, Inc.
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    9. Romer,Paul M, 1989. "What determines the rate of growth and technological change?," Policy Research Working Paper Series 279, The World Bank.
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    11. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1.
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    13. Abramovitz, Moses & David, Paul A, 1973. "Reinterpreting Economic Growth: Parables and Realities," American Economic Review, American Economic Association, vol. 63(2), pages 428-439, May.
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    15. Summers, Robert & Heston, Alan, 1988. "A New Set of International Comparisons of Real Product and Price Levels Estimates for 130 Countries, 1950-1985," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(1), pages 1-25, March.
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