Investment and Productivity Growth - A Survey from the Neoclassical and New Growth Perspectives

Kevin Stiroh ()

Working Papers from Gouvernement du Canada - Industry Canada, Gouvernement du Canada - Industry Canada

Abstract: This paper reviews the wide literature on investment and productivity with the debate between the neoclassical and the new growth theories providing a context for discussion. Both schools of thought regard investment, broadly defined to include purchases of tangible assets, human capital expenditures, research and development efforts, etc., as the fundamental source of improved productivity and economic growth, but the two views diverge on the exact transmission mechanism. Most importantly, the neoclassical framework focuses on internal returns to investors who appropriate the benefits of new investment, while new growth models emphasize external effects as productivity gains spill over to others. This crucial dichotomy leads to differences regarding the role of investment as a source of growth, policy prescriptions, and implications for long-run gains in productivity and living standards. The paper then reviews several empirical and conceptual issues relating to investment and productivity and outlines areas for future research.

Keywords: INVESTMENTS; PRODUCTIVITY; ECONOMIC THEORY; ECONOMIC GROWTH (search for similar items in EconPapers)
JEL-codes: O10 O47 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2000
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fth:cagoip:24

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