Equipment Investment and Economic Growth
J. Bradford DeLong
University of California, Berkeley; Federal Reserve Bank of San Francisco; National Bureau of Economic Research (NBER)
Lawrence H. Summers
Harvard University; National Bureau of Economic Research (NBER)
NBER Working Paper No. w3515
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.
Number of Pages in PDF File: 71
Date posted: April 27, 2000
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