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

  • Pritchett, Lant

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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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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