CAPITAL ACCUMULATION AND GROWTH: A NEW LOOK AT THE EMPIRICAL EVIDENCE

Using annual data for 75 countries in the period 1960-2000, we present evidence of a positive relationship between investment as a share of gross domestic product (GDP) and the long-run growth rate of GDP per worker. This result is robust for our full sample and for the subsample of non-OECD countries, but not for the subsample of OECD countries. Our analysis controls for time-invariant country-specific heterogeneity in growth rates, and for a range of time-varying control variables. We also address endogeneity issues, and allow for heterogeneity across countries in model parameters and for cross-section dependence. Copyright (C) 2010 John Wiley & Sons, Ltd.