The Productivity of Investment Determines Economic Growth Across Countries
DOI:
https://doi.org/10.17533/udea.le.n103a358502Keywords:
Economic growth, marginal capital-output ratio, Agreggated demandAbstract
Abstract: The purpose of this paper is to show that the marginal capital-output ratio in Harrod’s equation is explained by the growth rate of aggregate demand, and that this ratio, in turn, defines the economic growth rate of countries. To test these hypotheses, data from the Penn World Table PWT 10.0 was used, selecting 118 countries with complete information from 2000 to 2019. The estimation method employed was panel data with fixed effects. The conclusion reached is that the elasticity of the marginal capital-output ratio with respect to demand growth is unitary, as is the elasticity of economic growth with respect to investment efficiency.
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