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Decomposing the Twin-peaks in the World Distribution of Output-per-worker

  • Paul Beaudry
  • Fabrice Collard
  • David A. Green

This papers examines changes in the distribution of per-worker-output across countries over the period 1960-98, with a particular focus on identifying the forces behind the hollowing out of the middle of the distribution and the associated emergence of a twin-peaks phenomenon. The main finding of the paper is that most of the change in shape of the world distribution of income between 1960-1998 can be accounted for by changes in the parameters driving the growth process. In particular, we show that role of physical capital investment and population growth in affecting output growth has increased substantially over the period and that this increase can account for all the hollowing-out of the distribution. In contrast, we do not find that changes in the distribution of variables played much of a role, nor do we find any significant effects coming through non-linear convergence mechanisms or increased importance of education. Our results suggest that research aimed at understanding changes in the world distribution of income should focus on explaining why the social returns to physical capital accumulation where so high over the period 1978-98. The paper ends by discussing elements that help understand this phenomena.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9240.

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Date of creation: Sep 2002
Date of revision:
Handle: RePEc:nbr:nberwo:9240
Note: LS PR
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  1. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  2. Danny Quah, 1992. "Empirical Cross-Section Dynamics in Economic Growth," FMG Discussion Papers dp154, Financial Markets Group.
  3. 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.
  4. Paul Beaudry & Fabrice Collard, 2002. "Why has the Employment-Productivity Tradeoff among Industrialized Countries been so strong?," NBER Working Papers 8754, National Bureau of Economic Research, Inc.
  5. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  6. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
  7. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  8. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
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