Archived — Occasional Paper Number 24—Investment and Productivity Growth: a Survey From the Neoclassical and New Growth Perspectives, June 2000

Strategic Policy Sector

Economic Research and Policy Analysis Branch

Occasional Paper Number 24—Investment and Productivity Growth: a Survey From the Neoclassical and New Growth Perspectives, June 2000

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.

Date: 2000
Format: PDF
Catalogue number: C21-23/24-2000
ISBN: 0-662-64815-3

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