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Patterns of economic growth : hills, plateaus, mountains, and plains

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  • Pritchett, Lant

Abstract

Except during the Great Depression, the historical path for per capita Gross Domestic Product (GDP) in the United Stateshas been reasonably stable exponential trend growth, with modest cyclical deviation. Graphically, growth in the United States displays as a modestly sloping, only slightly bumpy, hill. But almost nothing that is true about per capita Gross Domestic Product (GDP) for the United States (or for other member countries of the Organization for Economic Cooperation and Development (OECD)) is true for developing countries. First, per capita Gross Domestic Product (GDP) in most developing countries does not follow a single time trend: For a given country, there is great instability in growth rates over time, relative to both average level of growth and to cross-sectional variance. These shifts in growth rates lead to distinct patterns. Some countries have had steady growth (hills and steep hills); others have had rapid growth followed by stagnation (plateaus); others have had rapid growth followed by declines (mountains) or even catastrophic declines (cliffs): still others have experienced continuous stagnation (plains) or even steady decline (valleys). Second, volatility--however measures--is much greater in developing than in industrial countries. These stylized observations about growth rates, the author concludes, suggest that it may be useless to use"panel data"to investigate long-term growth rates in developing countries. Perhaps more can be learned about developing countries by investigating what initiates (or halts) episodes of growth. There is something of a professional split in"growth"literature, the author observes. Macroeconomists studying industrial countries discuss steady-state growth and ponder whether all countries in the convergence club will reach the same happy level in the end. Development economists, on the other hand, are the pathologists of economics, having discovered that developing countries are most emphatically not all alike. Developing countries have found ways to be ecstatic but they have also discovered many different ways to be unhappy.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1947.

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Date of creation: 31 Jul 1998
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Handle: RePEc:wbk:wbrwps:1947

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Keywords: Public Health Promotion; Economic Conditions and Volatility; Health Monitoring&Evaluation; Economic Theory&Research; Statistical&Mathematical Sciences; Economic Growth; Health Monitoring&Evaluation; Achieving Shared Growth; Governance Indicators; Economic Conditions and Volatility;

References

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  1. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
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  9. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  10. Ben-David, Dan & Papell, David, 1995. "Slowdowns and Meltdowns: Post-war Growth Evidence from 74 Countries," CEPR Discussion Papers 1111, C.E.P.R. Discussion Papers.
  11. Andrews, Donald W K, 1989. "Power in Econometric Applications," Econometrica, Econometric Society, vol. 57(5), pages 1059-90, September.
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  13. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
  14. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  15. Pritchett, Lant, 1996. "Mind your P's and Q's : the cost of public investment is not the value of public capital," Policy Research Working Paper Series 1660, The World Bank.
  16. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
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  20. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
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Citations

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Cited by:
  1. Benno J. Ndulu & Stephen A. O'Connell, 1999. "Governance and Growth in Sub-Saharan Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 41-66, Summer.
  2. Benjamin R. Bridgman & Igor D. Livshits & James C. MacGee, 2004. "For Sale: Barriers to Riches," University of Western Ontario, Economic Policy Research Institute Working Papers 20043, University of Western Ontario, Economic Policy Research Institute.
  3. Francisco Rodriguez, 2007. "Have Collapses in Infrastructure Spending led to Cross-Country Divergence in Per Capita GDP?," Working Papers 52, United Nations, Department of Economics and Social Affairs.
  4. David Stasavage, 2000. "Private Investment and Political Uncertainty," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 25, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. Jorge Carrera & Diego Bastourre, 2004. "Could the Exchange Rate Regime Reduce Macroeconomic Volatility?," Econometric Society 2004 Latin American Meetings 309, Econometric Society.
  6. Philipp Harms, 2001. "International investment in a model of stochastic growth and development traps," Journal of Economics, Springer, vol. 74(2), pages 131-155, June.

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