Investment Rates and the Aggregate Production Function

Abstract

In this paper we consider a simple version of the neoclassical growth model, and carry out an empirical analysis of the main determinants of aggregate investment across countries. More specifically, we study the effects on aggregate investment of income growth, capital income shares, the relative price of capital, and various market distortions. This exercise also sheds light into the shape of the neoclassical production function. We check these investment patterns for both OECD and non-OECD countries. We also decompose investment data into equipment and structures, and explore major factors affecting their relative pricesInvestment rates; Aggregate production function; Relative price of investment