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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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