This paper finds evidence in favor of the claim that imported machinery lea
ds to higher growth in developing countries, Using panel data, we find that
investment in domestically produced equipment reduces the growth rate whil
e investment in imported equipment increases it, The advantage of this stud
y over the paper of Lee [Journal of Development Economics, 48 (1) (1995) 91
] is that since we make a distinction between imported and domestically pro
duced equipment, we are able to distinguish our hypothesis from the DeLong
and Summers hypothesis chat equipment investment in general contributes mor
e to growth. (C) 2001 Elsevier Science B.V. All rights reserved.