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.
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