IZA DP No. 1174: Capital Accumulation and Growth: A New Look at the Empirical Evidence
published in: Journal of Applied Econometrics, 2010, 5 (7), 1073-1099
We present evidence that an increase in investment as a share of GDP predicts a higher growth rate of output per worker, not only temporarily, but also in the steady state. These results are found using pooled annual data for a large panel of countries, using pooled data for non-overlapping five-year periods, or allowing for heterogeneity across countries in regression coefficients. They are robust to model specifications and estimation methods. The evidence that investment has a long-run effect on growth rates is consistent with the main implication of certain endogenous growth models, such as the AK model.