Equipment investment, output and productivity in China

Abstract

The objective of this paper is threefold. Firstly, we provide evidence of the role played by equipment investment as determinant of output and labor productivity in China for the period 1962-2004. Secondly, we assess its robustness in allowing for other relevant sources of economic growth, and finally, we analyze the role played by these different factors on long-run growth. For this purpose we focused our analysis on two factors that have apparently played a relevant role in accounting for China's growth, namely, equipment investment and exports. However, knowing the close relationships that exist between equipment investments with other variables, we have included R&D expenditure, human capital and infrastructures in our analysis. We start up our study exploring the link among equipment investment, R&D expenditure, exports and the real exchange rate as main determinants of labor productivity and output in the short and long-run, that is, our base model. Afterwards, we included human capital and infrastructures in our augmented model. Given the potential interdependence and endogeneity of the variables considered, we employed as statistical framework for analysis the cointegrated VAR model. Our results provide evidence that equipment investment and exports are one of the most important determinants of both labor productivity and output in the long-run even controlling with other sources of growth in China. Furthermore, when human capital and infrastructures are included, we found that positively affect to economic activity in the long-run. Finally, our findings provide robust evidence that R&D expenditure enhances equipment investment on the long-run growth.

The Nexus between Infrastructure Investment and Economic Growth in the Mexican Urban Areas

“…Mizutani and Tanaka [24] find that infrastructure investment by the national government accelerates that investment realized by the governments of the Japanese prefectures. Pereira and Andraz [25] highlight that investment in highways positively affects the aggregated production in a majority of the states of the US Herrerías and Orts [26] provide evidence on equipment investment and human capital as determinant factors of the product growth of China in the long run.…”

Capital goods imports and long-run growth: Is the Chinese experience relevant to developing countries?

“…4 At the same time, many authors have underlined the empirical significance of machinery and equipment investment in economic growth. See for example the seminal works by De Long and Summers (1991) and, for the Chinese case, Herrerias and Orts (2010). 5 According to Keller (2004), "for most countries, foreign sources of technology are of dominant importance (90 per cent or more) for productivity growth".…”

Productivity enhancement at home via cross‐border acquisitions: The roles of learning and contemporaneous domestic investments

“…In the presence of institutional hazards, the acquiring firm's diversion of resources to implement proactive political strategies will have a negative effect on its productive performance (Henisz, ). At the same time, recent studies in economics suggest that such learning opportunities are likely greater when the local market is more competitive (Bloom et al , ; Herrerias and Orts, )—that is, in our case, when acquiring a firm in a country whose local market is more competitive than the local market of the acquirer's country. Competitiveness and the incitation to innovate (in a broad sense that includes organizational innovation) are linked to the endowment, in the target's country, of market‐supporting institutions.…”