Have countries accumulated enough capital? A non-parametric approach

Abstract

ABSTRACT In this paper, we analyse the effect of capital accumulation on economic growth and verify whether countries have accumulated enough capital. We make use of panel data for 92 countries from 1965–2019, combined with intuitive robust non-parametric modelling based on linear programming. Our result indicates first that capital accumulation is important for economic growth. Second, we show that developing countries suffer from under-investment in capital, while developed countries have unexploited capacity. Therefore, to promote sustainable growth, developing countries need to implement policies to increase their capital stock. However, the situation of developed countries indicates that more capital accumulation is not the correct path for these countries, but better capital use is. Finally, we highlight the particular patterns of China and India and challenge our results by running three sensitivity tests. They confirm our early findings.