Equipment Investment and Economic Growth

71 Pages Posted: 27 Apr 2000  

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); Harvard University - Harvard Kennedy School (HKS)

Date Written: November 1990

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

DeLong, J. Bradford and Summers, Lawrence H., Equipment Investment and Economic Growth (November 1990). NBER Working Paper No. w3515. Available at SSRN: https://ssrn.com/abstract=226830

James Bradford DeLong (Contact Author)

University of California, Berkeley ( email )

Department of Economics
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Federal Reserve Bank of San Francisco

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National Bureau of Economic Research (NBER)

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Lawrence H. Summers

Harvard University ( email )

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National Bureau of Economic Research (NBER)

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Harvard University - Harvard Kennedy School (HKS) ( email )

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