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Accounting for Cross-Country Income Differences

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Author Info
Francesco Caselli

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Abstract

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

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0667.

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Date of creation: Jan 2005
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Handle: RePEc:cep:cepdps:dp0667

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Related research
Keywords: income variance; capital; development accounting;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
M00 - Business Administration and Business Economics; Marketing; Accounting - - General - - - General
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

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References listed on IDEAS
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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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  30. 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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  57. 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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