Why Development Levels Differ: The Sources of Differential Economic Growth in a Panel of High and Low Income Countries
Average income per capita in the countries of the OECD was more than 20 times larger in 2000 than that of the poorest countries of sub-Sahara Africa and elsewhere, and many of the latter are not only falling behind the world leaders, but have even regressed in recent years. At the same time, other low-income countries have shown the capacity to make dramatic improvements in income per capita. Two general explanations have been offered to account for the observed patterns of growth. One view stresses differences in the efficiency of production are the main source of the observed gap in output per worker. A competing explanation reverses this conclusion and gives primary importance to capital formation. We examine the relative importance of these two factors as an explanation of the gap using 112 countries over the period 1970-2000. We find that differences in the efficiency of production, as measured by relative levels of total factor productivity, are the dominant factor accounting for the difference in development levels. We also find that the gap between rich and most poor nations is likely to persist under prevailing rates of saving and productivity change. To check the robustness of these conclusions, we employ different models of the growth process and different assumptions about the underlying data. Although different models of growth produce different relative contributions of capital formation and TFP, we conclude that the latter is the dominant source of gap. This conclusion must, however, be qualified by the poor quality of data for many developing countries.
|Date of creation:||Oct 2007|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters, in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
- Barry P. Bosworth & Susan M. Collins, 2003. "The Empirics of Growth: An Update," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 113-206.
- Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
- Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, Enero.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13469. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.