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- Title
Reassessing the social returns to equipment investment.
- Authors
Auerbach, Alan J.; Hassett, Kevin A.
- Abstract
This article focuses on reassessing the social returns to equipment investment. In the middle of growing concern about the slow rate of improvement in living standards in the United States, considerable attention has focused on the sources of economic growth and the role of investment in the growth process. Under the competitive assumptions usually employed, and absent government intervention, investor behavior will equate the social returns to different assets. Competitive conditions do not ensure the optimal allocation of investment, and economic growth can be enhanced by devoting a greater share of the economy's resources to investments with the highest social returns. Economists J. De Long and Lawrence Summers have argued that such externalities do exist and are important for investment in equipment. They base their conclusion on the finding of a strong link between equipment investment and economic growth for a broad cross section of nations. Of the countries in De Long and Summers' sample, the OECD nations--which include Japan, Western Europe, and Canada--have economies that are most similar to that of the United States.
- Subjects
OECD countries; ECONOMIC development; INDUSTRIAL equipment; INVESTMENTS; RATE of return; COST of living; INTERVENTION (Federal government); FINANCE
- Publication
Quarterly Journal of Economics, 1994, Vol 109, Issue 3, p789
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/2118422