Working Paper: NBER ID: w3515
Authors: Robert J. Barro; Barry Bosworth; Anne Case; E. R. Q. Qitler; Paul M. Vid; Jay Hamilton; Tale Jorgenson; Anne Kroeger; Ian W. T. Paul; Andrei Shleifer; Ert Waldmann; Jeffrey Williamson
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.
Keywords: Economic Growth; Investment; Machinery; Productivity; Social Returns
JEL Codes: O11; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Machinery and equipment investment (E22) | Economic growth (O49) |
| Higher equipment investment (E22) | Faster economic growth (O49) |
| Equipment prices behavior (E30) | Economic growth (O49) |
| Social return to equipment investment in well-functioning market economies (I26) | Economic growth (O00) |
| Alternative sources of variation in equipment investment (D25) | Productivity growth (O49) |