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Economic Growth in a Cross Section of Countries

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  • Robert J. Barro

Abstract

In neoclassical growth models with diminishing returns to capital, a country's per capita growth rate tends to be inversely related to its initial level of income per person. This convergence hypothesis seems to be inconsistent with the cross-country evidence, which indicates that per capita growth rates for about 100 countries in the post-World War II period are uncorrelated with the starting level of per capita product. However, if one holds constant measures of initial human capital-measured by primary and secondary school-enrollment rates - there is evidence that countries with lower per capita product tend to grow faster. Countries with higher human capital also have lower fertility rates and higher ratios of physical investment to GDP. These results on growth, fertility, and investment are consistent with some recent theories of endogenous economic growth. With regard to government, the cross-country data indicate that government consumption is inversely related to growth, whereas public investment has little relation with growth. Average growth rates are positively related to political stability, which may capture the benefits of secure property rights. There is also some indication that distortions of investment-goods prices are adverse for growth. Finally, the analysis leaves unexplained a good deal of the relatively weak growth performances of countries in sub- Saharan Africa and Latin America.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3120.

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Date of creation: Sep 1989
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Publication status: published as The Quarterly Journal of Economics, Vol. CVI, No. 425, pp. 407-443, (May 1991).
Handle: RePEc:nbr:nberwo:3120

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  1. Robert J. Barro, 1989. "A Cross-Country Study of Growth, Saving, and Government," NBER Working Papers 2855, National Bureau of Economic Research, Inc.
  2. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  4. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 163, Cowles Foundation for Research in Economics, Yale University.
  5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  6. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 72, pages 584.
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  1. Why This Isn’t A Time to Worry that Government Is Spending Too Little
    by Matt Mitchell in Neighborhood Effects on 2010-06-30 21:56:24
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