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Productive investment and growth : testing the validity of the AK model from a panel perspective

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Romero-Avila, Diego

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Abstract In this paper, we analyse the relationship between productive physical investment and economic growth from a panel perspective for a sample of 61 countries spanning the period 1950-1992. The analysis can be thought of as two-fold. First, we test the empirical validity of AK models following the logic by Jones (1995). For that purpose, we determine the degree of persistence of physical investment rates and growth by employing recently developed panel unit roots tests which enable us to make more reliable inferences about the existence of stochastic trends in the series. Second, we estimate the long-run effect of physical investment on growth by using panel data techniques rather than cross-section regressions. Overall, our findings cast doubts on the rejection of the empirical validity of the AK model as suggested by Jones’ analysis.
Keywords economic growth; theory; estimation; panel; OECD; investment
Classification Political Economy; Economic Statistics, Econometrics, Business Informatics
Free Keywords Panel Unit Root Tests; Endogenous Growth; Physical Investment
Document language English
Publication Year 2009
Page/Pages p. 3027-3043
Journal Applied Economics, 41 (2009) 23
DOI http://dx.doi.org/10.1080/00036840701335611
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)
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