Economic growth and under-investment: A nonparametric approach

This paper expounds a ratio to measure countries' under-investment which combines the advantages of being simple, intuitive, easy to compute, and nonparametric. Applying this to a panel of 81 countries over the period extending between 1965 and 2014 evidences a case of under-investment in all countries. Over this time period, OECD countries and Asian Tigers show less and less constrained by their available resources, while the contrary is true of Latin American and African countries. The distribution of our under-investment ratio also appears to become bi-modal over time, which implies that under-investment plays a role in economic divergence between countries. Our findings are supported by several statistical tests and a sensitivity analysis. (C) 2019 Elsevier B.V. All rights reserved.