...And Put Your Money Into New Equipment

While low inflation provides an environment conducive to investment, perhaps DeLong and Summers' most startling finding was the "supernormal" positive effect of investment in equipment and machinery on long-term growth. Their research, covering a number of developing and industrial nations from 1960 to 1985, indicates that a country investing 5% rather than 2% of national product in machinery would boost its total annual output by about 20% after 25 years. Indeed, the authors attribute most of the difference between growth in the U.S. and Japan to Japan's far higher equipment investment level.

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