The Relationship between Physical Capital and Economic Growth in Palestine

Abstract

The objective of this study is to measure the extent to which the Relationship between Physical Capital and Economic Growth in Palestine (1995-2012) using Solow model and based on the utilization of Cop- Douglas production function, in order to estimate the contribution of physical to economic growth, the method used for the analysis is the time series analysis.

The results showed that the Economic variables were found to be unstable over time and then turn stable after the first differences. Later; variables were subjective to co-integration test according to Johansson method, which proved the presence of double co- integration between models variables, some of the results of the study were; the presence of correlation between physical capital and economic growth, in the sense that each affects the other.

The study recommends the emphasis on investment in Physical capital, and employees for its important and prominent role in increasing economic growth.