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Accounting for Cross-Country Income Differences

In: Handbook of Economic Growth

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Caselli, Francesco

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Abstract

Why are some countries so much richer than others? Development Accounting is a first-pass attempt at organizing the answer around two proximate determinants: factors of production and efficiency. It answers the question "how much of the cross-country income variance can be attributed to differences in (physical and human) capital, and how much to differences in the efficiency with which capital is used?" Hence, it does for the cross-section what growth accounting does in the time series. The current consensus is that efficiency is at least as important as capital in explaining income differences. I survey the data and the basic methods that lead to this consensus, and explore several extensions. I argue that some of these extensions may lead to a reconsideration of the evidence.

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This chapter was published in: Philippe Aghion & Steven Durlauf (ed.) Handbook of Economic Growth, , chapter 09, pages 679-741, 2005.

This item is provided by Elsevier in its series Handbook of Economic Growth with number 1-09.

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This chapter was published in the following book, which is listed on IDEAS:
Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1, September. [Downloadable!] (restricted)
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O0 - Economic Development, Technological Change, and Growth - - General

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  2. Shekhar Aiyar & Carl-Johan Dalgaard, 2004. "Total Factor Productivity Revisited: A Dual Approach to Development Accounting," EPRU Working Paper Series 04-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
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  20. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
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  24. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
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  26. Richard J. Murnane & John B. Willett & Frank Levy, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," NBER Working Papers 5076, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  28. Harrigan, James, 1999. "Estimation of cross-country differences in industry production functions," Journal of International Economics, Elsevier, vol. 47(2), pages 267-293, April. [Downloadable!] (restricted)
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  29. Francesco Caselli & Silvana Tenreyro, 2004. "Is Poland the next Spain?," Communities and Banking, Federal Reserve Bank of Boston. [Downloadable!]
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  30. Gelb, Alan & Sabot, Richard H. & Knight, John B., 1988. "Lewis through a looking glass : public sector employment, rent-seeking, and economic growth," Policy Research Working Paper Series 133, The World Bank. [Downloadable!]
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  31. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc. [Downloadable!]
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  33. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
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  37. Mark Bils & Peter J. Klenow, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December. [Downloadable!] (restricted)
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  46. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
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  51. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August. [Downloadable!] (restricted)
  52. Stephen L. Parente, 2000. "Learning-by-Using and the Switch to Better Machines," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 675-703, October. [Downloadable!] (restricted)
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  54. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November. [Downloadable!] (restricted)
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  58. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June. [Downloadable!] (restricted)
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