IDEAS home Printed from https://ideas.repec.org/a/bla/ecinqu/v64y2026i2p591-613.html

Dynamic development accounting and relative income traps

Author

Listed:
  • Patrick A. Imam
  • Jonathan R. W. Temple

Abstract

Recent work suggests that cross‐country convergence has strengthened over time. Here we explore mobility and convergence in relative income and relative total factor productivity (TFP) using finite state Markov chains. We find that low‐income countries rarely improve their position relative to the US. Since capital‐output ratios have approached or exceeded the US level and human capital is converging, the persistence of low relative income seems to originate in low relative TFP. We study the dynamics of relative TFP, how they have changed, and how they interact with absolute levels of human capital, casting new light on the future of convergence.

Suggested Citation

  • Patrick A. Imam & Jonathan R. W. Temple, 2026. "Dynamic development accounting and relative income traps," Economic Inquiry, Western Economic Association International, vol. 64(2), pages 591-613, April.
    • Handle: RePEc:bla:ecinqu:v:64:y:2026:i:2:p:591-613
    DOI: 10.1111/ecin.70028
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecin.70028
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecin.70028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Imam, Patrick A. & Temple, Jonathan R.W., 2024. "Political institutions and output collapses," European Journal of Political Economy, Elsevier, vol. 85(C).
    2. Patrick A. Imam & Jonathan R. W. Temple, 2026. "State capacity and growth regimes," Empirical Economics, Springer, vol. 70(5), pages 1-34, May.
    3. Daan Freeman & Robert Inklaar & W. Erwin Diewert, 2021. "Natural Resources and Missing Inputs in International Productivity Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(1), pages 1-17, March.
    4. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," Economic Journal, Royal Economic Society, vol. 106(437), pages 1056-1069, July.
    5. Kraay, Aart & Raddatz, Claudio, 2007. "Poverty traps, aid, and growth," Journal of Development Economics, Elsevier, vol. 82(2), pages 315-347, March.
    6. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    7. repec:wbk:wbpubs:42452 is not listed on IDEAS
    8. John Stachurski, 2009. "Economic Dynamics: Theory and Computation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012774, December.
    9. Davide Fiaschi & Andrea Mario Lavezzi & Angela Parenti, 2020. "Deep and Proximate Determinants of the World Income Distribution," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(3), pages 677-710, September.
    10. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    11. Patel, Dev & Sandefur, Justin & Subramanian, Arvind, 2021. "The new era of unconditional convergence," Journal of Development Economics, Elsevier, vol. 152(C).
    12. Frank Bickenbach & Eckhardt Bode, 2003. "Evaluating the Markov Property in Studies of Economic Convergence," International Regional Science Review, , vol. 26(3), pages 363-392, July.
    13. Fernando Gabriel Im & David Rosenblatt, 2015. "Middle-Income Traps: A Conceptual and Empirical Survey," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 1-39.
    14. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    15. Koopman, Eline & Wacker, Konstantin M., 2023. "Drivers of growth accelerations: What role for capital accumulation?," World Development, Elsevier, vol. 169(C).
    16. Aart Kraay & David McKenzie, 2014. "Do Poverty Traps Exist? Assessing the Evidence," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 127-148, Summer.
    17. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, Centre for Economic Policy Research.
    18. William Easterly, 2006. "Reliving the 1950s: the big push, poverty traps, and takeoffs in economic development," Journal of Economic Growth, Springer, vol. 11(4), pages 289-318, December.
    19. Pritchett, Lant, 2000. "The Tyranny of Concepts: CUDIE (Cumulated, Depreciated, Investment Effort) Is Not Capital," Journal of Economic Growth, Springer, vol. 5(4), pages 361-384, December.
    20. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-1055, July.
    21. Peter J. 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.
    22. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
    23. Fiaschi, Davide & Lavezzi, Andrea Mario, 2003. "Distribution Dynamics and Nonlinear Growth," Journal of Economic Growth, Springer, vol. 8(4), pages 379-401, December.
    24. Imam, Patrick A. & Temple, Jonathan R.W., 2026. "Growth, interrupted: How crises delay global convergence," Journal of International Money and Finance, Elsevier, vol. 163(C).
    25. Artur Silva Lopes, 2025. "Assessing Income Convergence with a Long‐run Forecasting Approach: Some New Results," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 71(1), February.
    26. Colin O'Reilly & Ryan H. Murphy, 2022. "An Index Measuring State Capacity, 1789–2018," Economica, London School of Economics and Political Science, vol. 89(355), pages 713-745, July.
    27. Patrick A. Imam & Jonathan R. W. Temple, 2026. "Dynamic development accounting and relative income traps," Economic Inquiry, Western Economic Association International, vol. 64(2), pages 591-613, April.
    28. Quah, Danny, 1996. "Twin peaks : growth and convergence in models of distribution dynamics," LSE Research Online Documents on Economics 2278, London School of Economics and Political Science, LSE Library.
    29. Ulrich K. Muller & James H. Stock & Mark W. Watson, 2022. "An Econometric Model of International Growth Dynamics for Long-Horizon Forecasting," The Review of Economics and Statistics, MIT Press, vol. 104(5), pages 857-876, December.
    30. Sutirtha Roy & Martin Kessler & Arvind Subramanian, 2016. "Glimpsing the End of Economic History? Unconditional Convergence and the Missing Middle Income Trap," Working Papers id:11404, eSocialSciences.
    31. Patrick A. Imam & Jonathan R. W. Temple, 2024. "At the Threshold: The Increasing Relevance of the Middle-Income Trap," IMF Working Papers 2024/091, International Monetary Fund.
    32. Matt Lowe & Chris Papageorgiou & Fidel Perez‐Sebastian, 2019. "The Public and Private Marginal Product of Capital," Economica, London School of Economics and Political Science, vol. 86(342), pages 336-361, April.
    33. Quah, Danny T, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, vol. 2(1), pages 27-59, March.
    34. Amparo Castello-Climent & Rafael Domenech, 2024. "Convergence in human capital and income," Economics Bulletin, AccessEcon, vol. 44(2), pages 652-661.
    35. Quah, Danny T, 1996. "Convergence Empirics across Economies with (Some) Capital Mobility," Journal of Economic Growth, Springer, vol. 1(1), pages 95-124, March.
    36. Andrew Mountford, 2025. "Economic Growth Analysis When Balanced Growth Paths May Be Time Varying," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 87(3), pages 477-498, June.
    37. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
    38. Grier, Kevin & Grier, Robin, 2007. "Only income diverges: A neoclassical anomaly," Journal of Development Economics, Elsevier, vol. 84(1), pages 25-45, September.
    39. Michael Kremer & Jack Willis & Yang You, 2022. "Converging to Convergence," NBER Macroeconomics Annual, University of Chicago Press, vol. 36(1), pages 337-412.
    40. Kraay, Aart & McKenzie, David, 2014. "Do poverty traps exist ?," Policy Research Working Paper Series 6835, The World Bank.
    41. Fiaschi, Davide & Lavezzi, Andrea Mario, 2007. "Nonlinear economic growth: Some theory and cross-country evidence," Journal of Development Economics, Elsevier, vol. 84(1), pages 271-290, September.
    42. Feyrer James D, 2008. "Convergence by Parts," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-35, July.
    43. Kinnunen, Maarit & Wood, Emma H. & Li, Yanning & Moss, Jonathan, 2022. "Self-recorded conversations in tourism memory research," Annals of Tourism Research, Elsevier, vol. 96(C).
    44. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    45. Daniel Gallardo‐Albarrán & Robert Inklaar, 2021. "The Role Of Capital And Productivity In Accounting For Income Differences Since 1913," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 952-974, July.
    46. Reda Cherif & Fuad Hasanov, 2019. "The Leap of the Tiger: Escaping the Middle‐income Trap to the Technological Frontier," Global Policy, London School of Economics and Political Science, vol. 10(4), pages 497-511, November.
    47. Lührmann, Anna & Marquardt, Kyle L. & Mechkova, Valeriya, 2020. "Constraining Governments: New Indices of Vertical, Horizontal, and Diagonal Accountability," American Political Science Review, Cambridge University Press, vol. 114(3), pages 811-820, August.
    48. Sutirtha Roy & Martin Kessler & Arvind Subramanian, 2016. "Glimpsing the End of Economic History? Unconditional Convergence and the Missing Middle Income Trap," Working Papers id:11404, eSocialSciences.
    49. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Patrick A. Imam & Jonathan R. W. Temple, 2026. "Dynamic development accounting and relative income traps," Economic Inquiry, Western Economic Association International, vol. 64(2), pages 591-613, April.
    3. Imam, Patrick A. & Temple, Jonathan R.W., 2026. "Growth, interrupted: How crises delay global convergence," Journal of International Money and Finance, Elsevier, vol. 163(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Imam, Patrick A. & Temple, Jonathan R.W., 2026. "Growth, interrupted: How crises delay global convergence," Journal of International Money and Finance, Elsevier, vol. 163(C).
    2. Imam, Patrick A. & Temple, Jonathan R.W., 2024. "Political institutions and output collapses," European Journal of Political Economy, Elsevier, vol. 85(C).
    3. Davide Fiaschi & Paul A. Johnson, 2026. "(In)stability in the dynamics of the cross-country distribution of income per capita," Empirical Economics, Springer, vol. 70(2), pages 1-46, February.
    4. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.
    5. Barnabé Walheer & Sergio Perelman, 2025. "Resource capacity and economic growth convergence," Journal of Productivity Analysis, Springer, vol. 63(3), pages 317-338, June.
    6. Adriana Di Liberto, 2007. "Convergence and Divergence in Neoclassical Growth Models with Human Capital," Economia politica, Società editrice il Mulino, issue 2, pages 289-322.
    7. Barnabé Walheer, 2016. "Multi-Sector Nonparametric Production-Frontier Analysis of the Economic Growth and the Convergence of the European Countries," Pacific Economic Review, Wiley Blackwell, vol. 21(4), pages 498-524, October.
    8. Walheer, Barnabé, 2016. "Growth and convergence of the OECD countries: A multi-sector production-frontier approach," European Journal of Operational Research, Elsevier, vol. 252(2), pages 665-675.
    9. Seonyoung Park & Donggyun Shin, 2023. "Recent changes in the nature of the distribution dynamics of the US county incomes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1048-1067, November.
    10. Daniel J. Henderson & R. Robert Russell, 2025. "Accounting for two-club convergence," Journal of Productivity Analysis, Springer, vol. 63(3), pages 269-283, June.
    11. Völlmecke, Dominik & Jindra, Björn & Marek, Philipp, 2016. "FDI, human capital and income convergence—Evidence for European regions," Economic Systems, Elsevier, vol. 40(2), pages 288-307.
    12. Silvia Dal Bianco, 2016. "Going clubbing in the eighties: convergence in manufacturing sectors at a glance," Empirical Economics, Springer, vol. 50(2), pages 623-659, March.
    13. Walheer, Barnabé, 2018. "Labour productivity growth and energy in Europe: A production-frontier approach," Energy, Elsevier, vol. 152(C), pages 129-143.
    14. Carlos Mendez & Mitsuhiko Kataoka, 2021. "Disparities in regional productivity, capital accumulation, and efficiency across Indonesia: A club convergence approach," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 790-809, May.
    15. Oleg Badunenko & Diego Romero‐Ávila, 2013. "Financial Development And The Sources Of Growth And Convergence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 629-663, May.
    16. Dylan Fitz & Shyam Gouri Suresh, 2021. "Poverty traps across levels of aggregation," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(4), pages 909-953, October.
    17. Ulaşan, Bülent, 2012. "Cross-country growth empirics and model uncertainty: An overview," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 6, pages 1-69.
    18. Fulvio Castellacci, 2007. "Evolutionary And New Growth Theories. Are They Converging?," Journal of Economic Surveys, Wiley Blackwell, vol. 21(3), pages 585-627, July.
    19. Chang-Yang Lee, 2012. "Learning-by-doing in R&D, knowledge threshold, and technological divide," Journal of Evolutionary Economics, Springer, vol. 22(1), pages 109-132, January.
    20. Goñi, Edwin & Maloney, William F., 2017. "Why don’t poor countries do R&D? Varying rates of factor returns across the development process," European Economic Review, Elsevier, vol. 94(C), pages 126-147.

    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecinqu:v:64:y:2026:i:2:p:591-613. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.