Is Fixed Investment the Key to Economic Growth?

25 Pages Posted: 3 Jul 2007 Last revised: 17 Aug 2010

See all articles by Magnus Blomstrom

Magnus Blomstrom

Stockholm School of Economics - Department of Economics; National Bureau of Economic Research (NBER), at New York; Centre for Economic Policy Research (CEPR)

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Mario Zejan

SIDA

Date Written: August 1993

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

Blomstrom, Magnus and Lipsey, Robert E. and Zejan, Mario, Is Fixed Investment the Key to Economic Growth? (August 1993). NBER Working Paper No. w4436. Available at SSRN: https://ssrn.com/abstract=383801

Magnus Blomstrom (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9265 (Phone)
+46 8 342 818 (Fax)

National Bureau of Economic Research (NBER), at New York

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Mario Zejan

SIDA ( email )

105 25 Stockholm
Sweden
+46-8-698 50 00 (Phone)
+46-8-20 88 64 (Fax)

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