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Is Fixed Investment the Key to Economic Growth?

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  • Magnus Blomstrom
  • Robert E. Lipsey
  • Mario Zejan

Abstract

This paper examines shares of fixed capital formation in GOP and rates of economic growth for more than 100 countries over successive 5-year periods between 1965 and 1985 to determine the direction of causality between them. Simple regressions and multiple regressions including several standard determinants of growth, as well as a simple causality test, provide more evidence that increases in growth precede rises in rates of capital formation than that increases in capital formation precede increases in growth. High rates of fixed capital formation accompany rapid growth in per capita income, but we find no evidence that fixed investment is the only or main source of ignition for economic growth.

Suggested Citation

  • Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1993. "Is Fixed Investment the Key to Economic Growth?," NBER Working Papers 4436, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4436
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    References listed on IDEAS

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    1. Benhabib, Jess & Jovanovic, Boyan, 1991. "Externalities and Growth Accounting," American Economic Review, American Economic Association, vol. 81(1), pages 82-113, March.
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    7. Sen, Amartya, 1983. "Development: Which Way Now?," Economic Journal, Royal Economic Society, vol. 93(372), pages 742-762, December.
    8. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 13(Spr), pages 3-9.
    9. Moses Abramovitz, 1956. "Resource and Output Trends in the United States since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1.
    10. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1992. "What Explains Developing Country Growth?," NBER Working Papers 4132, National Bureau of Economic Research, Inc.
    11. Moses Abramovitz, 1956. "Resource and Output Trends in the United States since 1870," NBER Chapters, in: Resource and Output Trends in the United States since 1870, pages 1-23, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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