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Capital accumulation


The process of increasing the stock of capital. This is one of the main sources of economic growth in the short and medium run. Whether capital accumulation can raise long-run growth is not obvious. This is because a high capital stock can only be maintained by significant investment to replace depreciated capital, and because long-run growth is due to increases in the quality of capital or introduction of new capital goods. Some empirical studies suggest that capital accumulation plays a minor or no role in economic growth, while others find that it has a significant positive effect on the long-run growth rate.


Reference: Oxford Press Dictonary of Economics, 5th edt.