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Capital Goods Imports and Long-Run Growth

  • Jong-Wha Lee

This paper presents an endogenous growth model of an open economy in which the growth rate of income is higher if foreign capital goods are used relatively more than domestic capital goods for the production of capital stock. Empirical results, using cross country data for the period 1960-85, confirm that the ratio of imported to domestically produced capital goods in the composition of investment has a significant positive effect on per capita income growth rates across countries, in particular, in developing countries. Hence, the composition of investment in addition to the volume of total capital accumulation is highlighted as an important determinant of economic growth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4725.

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Date of creation: Apr 1994
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Publication status: published as Journal of Development Economics, Vol. 48, no. 1 (1995): 91-110.
Handle: RePEc:nbr:nberwo:4725
Note: EFG ITI
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  1. Harrison, Ann, 1991. "Openness and growth : a time series, cross-country analysis for developing countries," Policy Research Working Paper Series 809, The World Bank.
  2. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  3. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  4. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
  5. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  6. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May.
  7. Jong-Wha Lee, 1992. "International Trade, Distortions and Long-Run Economic Growth," IMF Working Papers 92/90, International Monetary Fund.
  8. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  9. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
  10. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  11. Nouriel Roubini & Xavier Sala-i-Martin, 1991. "Financial Repression and Economic Growth," NBER Working Papers 3876, National Bureau of Economic Research, Inc.
  12. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
  13. Roubini, N. & Sala-I-Martin, X., 1991. "Financial development , the Trade Regime and Economic Growth," Papers 646, Yale - Economic Growth Center.
  14. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  15. Smith, Alasdair, 1984. "Capital theory and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 6, pages 289-324 Elsevier.
  16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  17. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  18. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  19. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, vol. 8(2), pages 149-161, April.
  20. Easterly, William & DEC, 1993. "How much do distortions affect growth?," Policy Research Working Paper Series 1215, The World Bank.
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