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Demographics, Human Capital and Economic Growth in Mexico: 1950-20051 Rodrigo García-Verdú2 Poverty Reduction and Economic Management unit Latin American and the Caribbean region The World Bank First draft: June 12, 2007 This draft: June 15, 2007 Abstract This paper analyzes Mexico’s economic growth over the period 1950-2005. It focuses on the contributions to growth in real GDP per capita of: (i) demographics, meaning changes in the population and its age structure; and (ii) human capital accumulation, including increases in educational attainment and in life expectancy at birth. For this purpose, the paper performs two growth accounting exercises to decompose the growth rate of real GDP into the contributions of: (i) the employed population and the total population; and (ii) physical capital, human capital, and total factor productivity. Finally, the paper applies a methodology recently developed to impute a monetary value to the increases in life expectancy at birth and thus obtain a measure of the contributions of improved health to economic growth. The results show that over this period: (i) the demographic changes registered in Mexico are key in explaining its economic growth performance; (ii) growth in the capital stock accounted for nearly a third of the observed growth in real GDP, increases in educational attainment also accounted for about a third, while growth in total factor productivity accounted for the remaining third; and (iii) increases in life expectancy at birth have been a major contributor to improvements in welfare, accounting for nearly half of the increase in a measure of augmented or full income. Keywords: Economic Growth, Growth Accounting, Sources of Growth, Total Factor Productivity, Demographic Transition, Human Capital. JEL Classification: O47, O54 1 Preliminary and incomplete. Comments welcome. Paper prepared for the Regional Seminar on “Economic Growth in Latin America,” organized by the Economic Development Division of the United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC), Santiago, Chile, June 14-15, 2007. I am grateful to Omar Bello and Osvaldo Kacef for the invitation to participate in the seminar, and to Igor Paunovic, Ernesto Sepúlveda and seminar participants for very helpful comments and suggestions. I have benefited from several discussions with David Rosenblatt. None of them is responsible for any remaining errors. The findings, interpretations, and conclusions are the author’s own and should not be attributed to The World Bank, its Executive Board of Directors, or any of its member countries. 2 E-mail: [email protected] 1 1. Introduction This paper analyzes Mexico’s economic growth over the past half century. It improves upon the existing literature by using new time series data and better economic measurement. The result is a more nuanced understanding about the sources of economic growth in Mexico. The paper begins by dividing the 1950-2005 period into five distinctive growth episodes, corresponding to the years 1950-1970, 1971-1982, 1983-1987, 19881994, and 1995-2005. This division is based on the behavior of five key macroeconomic variables: (i) the growth rate of real GDP per worker; (ii) the volatility of real GDP; (iii) inflation; (iii) fiscal balances; and (v) current account balances. This division of the 1950-2005 period into episodes serves two purposes. First, it places the growth rates of real GDP per worker in the broader macroeconomic context, which is necessary to assess growth performance. For example, a high growth episode that is accompanied by high and volatile inflation and large and increasing fiscal and current account deficits (e.g. 1971-1982), may be assessed to be inferior to another similarly high growth episode accompanied by low and stable inflation and moderate fiscal and current account deficits (e.g. 1950-1970). Second, the five episodes are used for two standard growth accounting exercises, which decompose the growth rate of real GDP into the contributions of: (i) the employed population and the total population; and (ii) physical capital, human capital, and total factor productivity. Typically these growth accounting exercises are performed for different sub-periods and are compared across them. Thus, the particular years included in each episode matter, which explains why the choice is based on the behavior of key macroeconomic variables. Finally, the paper applies a methodology recently developed by Becker, Philipson, and Soares (2005) and Murphy and Topel (2003) to impute a monetary value to the increases in life expectancy at birth and thus obtain a measure the contributions of improved health to economic growth. This section is based on García-Verdú (2006), which obtained a measure of the contribution to wellbeing of the increases in life expectancy at birth across states in Mexico over the period 1970-1995. The results of the paper show that the period 1950-2005: (i) the demographic changes registered in Mexico are key in explaining its economic growth performance, and particularly the differences between the growth rates of real GDP per capita and real GDP per worker; (ii) the growth of the capital stock accounted for nearly one third of the observed growth in real GDP, the observed increases in educational attainment also accounted for about a third, while growth in total factor productivity accounted for the remaining third; and (iii) the 2 observed increases in life expectancy at birth have been a major contributor to improvements in welfare, accounting for nearly half of the increase in a measure of augmented or full income. 2. Economic Growth in Mexico in Historical Perspective It is useful to begin by placing Mexico’s economic growth experience over the period 1950-2005 in long-term historical perspective and to compare it to its own previous growth record. For this purpose one can use time series data from two sources: (i) data on real GDP per capita (in constant 1970 pesos) for the period 1845-1997 from INEGI; and (ii) data on real GDP per capita (in 1990 international $) for the period 1500-1997 from Maddison (2003). Figure 1 Average annual growth rate of real GDP per capita in Mexico: 1845-2006 3.5% 3.03% 3.0% 2.5% 2.0% Percent 1.63% 1.56% 1.5% 0.89% 1.0% 0.5% 0.0% -0.5% -1.0% -0.74% 1845-1860 1877-1910 1921-1949 1950-1973 1973-2006 Periods Sources: Instituto Nacional de Estadística, Geografía e Informática (2000) and the references cited theirein for the period 1825-1949, and Groningen Growth and Development Centre (2007) for the period 1950-2006. Figure 2 Average annual growth rate of real GDP per capita in Mexico: 1500-1988 3 3.5% 3.17% 3.0% 2.5% 2.22% Percent 2.0% 1.5% 1.28% 1.0% 0.85% 0.5% 0.18% 0.0% -0.24% -0.5% 1500-1820 1820-1870 1870-1913 1913-1950 1950-1973 1973-1998 Periods Source: Madisson (2003). The growth rates from the two time series do not coincide due to the different periods considered as well as to the fact that they are based on different sources and deflators used. Nevertheless, the broad picture they describe is largely the same. Based on the two time series depicted above, the long-run growth experience can be summarized as follows: (i) from 1500 up until around 1870 the average growth rate of real GDP per capita was close to zero; (ii) growth accelerated remarkably between 1870 and 1910; (iii) the growth rate declined over the period 1910 and 1950 to less than half of that registered during the previous period; (vi) the average growth rate of around 3% per annum achieved over the period 19501973 is the highest on record; (vi) the average growth rate declined significantly after 1973, to between a half and a third of the growth rate achieved in the preceding period. Given the prominence that demographics have in explaining Mexico’s growth performance over the period 1950-2006, it is also useful to place its population growth record in long-term historical context. As the next figure shows, Mexico experienced an enormous increase in its total population relative to its previous historical experience. Over the course of the twentieth century its population increased from around 13.6 millions in 1900 to about 103.3 millions in 2005. Figure 3 Total Population in Mexico: 1790-2005 4 110 103.26 100 90 Millions of Persons 80 70 60 50 40 30 20 13.61 10 2000 1990 1980 1970 1960 1950 1940 1930 1920 1910 1900 1890 1880 1870 1860 1850 1840 1830 1820 1810 1800 1790 0 Year Sources: Instituto Nacional de Estadística, Geografía e Informática (2000) and XII Censo General de Población y Vivienda 2000 and II Conteo de Población y Vivienda 2005. This acceleration in its population growth rate over the past century is unprecedented relative to previous periods. As Figure 4 shows, Mexico’s population growth rate increased from 1921 up until 1970, then peaked sometime around the 1970s and has been declining since then, reaching a growth rate in 2005 similar to the one in 1900. Figure 4 Annual Growth Rate in the Total Population in Mexico: 1895-2005 4.0% 3.5% 3.2% 3.3% 3.0% 3.0% 2.7% 2.5% 2.3% 2.0% Percent 2.0% 1.5% 1.6% 1.5% 1.7% 1.3% 1.2% 1.1% 1.0% 0.5% 0.0% -0.5% -0.5% -1.0% 1895- 1900- 1910- 1921- 1930- 1940- 1950- 1960- 1970- 1980- 1990- 1995- 20001900 1910 1921 1930 1940 1950 1960 1970 1980 1990 1995 2000 2005 Period Sources: Instituto Nacional de Estadística, Geografía e Informática (2000), XII Censo General de Población y Vivienda 2000, and II Conteo de Población y Vivienda 2005. 5 The observed increase in Mexico’s total population and the change in its age structure is known as the demographic transition, a process through which most Latin American and the Caribbean countries are still undergoing, albeit at different stages. As will be discussed below, the implications for economic growth of this demographic transition are that very favorable conditions for the acceleration of real GDP per capita growth over the past three decades. Alas, higher growth rates did not materialize in Mexico or in most other countries in Latin America and the Caribbean.3 This poor economic performance sharply contrasts with the experience of the fast growing economies in South-East Asia (e.g. Hong Kong, South Korea, Singapore, and Taiwan) and Western Europe (e.g. Greece, Ireland, Portugal and Spain) during the 1960s and 1970s.4 3. Economic Growth in Mexico over the period 1950-2005 3.1 Growth Episodes The growth accounting or ‘sources of growth’ methodology allows decomposing the observed growth rate of real GDP into a part that is attributable to the observed growth rate of measured inputs (e.g. capital and labor) and a part attributable to improvements in the way inputs are combined to produced output. This last term is alternatively referred to as total factor productivity, technological change, or the Solow residual.5 The results of these growth accounting or ‘sources of growth’ exercises are typically presented for different sub-periods and are compared across them. In this regard, the recurrent balance of payments and financial crises that afflicted Mexico and other Latin America and Caribbean countries in the past implies that there is high volatility in GDP growth rates, so the choice of which particular years to include in each sub-periods will likely affect the results. Thus, it is useful to begin with a characterization of the different growth episodes Mexico has undergone over the period 1950-2005 based on some macroeconomic indicators (other than the growth rate of GDP per capita or per worker). Another reason why such a division of the 1950-2005 period into different episodes is useful is that it is necessary for interpreting and comparing economic growth performances across periods. In particular, a high growth episode that is accompanied by high and volatile inflation and large and increasing fiscal and 3 Chile was one of the few exceptions. See Bergoeing, Kehoe, Kehoe, and Soto (2002a, 2002b) for a model that explains the observed differences in growth performance between Chile and Mexico after 1982. 4 For the case of South East Asia, see Young (1995, 1994 and 1992). For the case of Ireland, see Bloom and Canning (2003a). 5 See Barro (1999) for a detailed exposition of the growth accounting methodology. For a historical account of the development of the concept of TFP, see Griliches (2000). 6 current account deficits (e.g. 1971-1982), may be assessed to be inferior to another similarly high growth episode accompanied by low and stable inflation and moderate fiscal and current account deficits (e.g. 1950-1970). Furthermore, a high growth episode that is accompanied by high and volatile inflation and large and increasing fiscal and current account deficits (e.g. 19711982) may in fact be considered inferior to another episode of lower but positive growth accompanied by low and stable inflation and moderate fiscal and current account deficits (e.g. 1995-2005). On the basis of this simple comparison it seems that the economic growth registered during the 1970s was not sustainable, so it may be an inappropriate benchmark with which to compare the growth performance of the Mexican economy after the 1981. This section divides the 1950-2005 period into five distinctive episodes These five episodes correspond to 1950-1970, 1971-1982, 1983-1987, 1988-1994, 1995-2005, which roughly coincide with the terms of one or more presidential administrations. This division is based on the behavior of five key macroeconomic variables: (i) growth rate of real GDP per worker; (ii) volatility of real GDP; (iii) inflation; (iv) fiscal balances; and (v), and current account balances. These five episodes and their defining characteristics can be summarized as follows (see Table 1 below): (i) The period 1950-1970, which roughly coincides with the period known as Desarrollo Estabilizador or import substitution model. This period was characterized by high growth of real GDP per worker, low real GDP volatility, low and stable inflation under a fixed exchange rate regime, moderate current account deficits, and moderate government deficits; (ii) The period 1971-1982, which coincides with the presidential terms of Echeverría and López Portillo and the so called Desarrollo Compartido and Alianza para la Producción models. This period was characterized by high growth of real GDP per worker (albeit lower than in the 19501970 period), low real GDP volatility, high and increasing inflation under a fixed exchange rate regime, moderate but increasing current account deficits, and high and increasing government deficits; (iii) The period 1983-1987, which coincides with the presidential terms of De la Madrid and the first structural adjustment programs, including the Programa Inmediato de Reordenación Económica (PIRE) and the Programa de Aliento y Crecimiento (PAC). This period was characterized by negative real GDP per worker growth, high real GDP volatility (relative to the previous episode), soaring and volatile inflation under a managed exchange rate regime, moderate and volatile current 7 account surpluses (achieved largely through abrupt exchange rate depreciations), and high but decreasing government deficits; (iv) The period 1988-1994, which coincides with the presidential terms of Salinas and the structural adjustment program known as the Pacto de Solidaridad Económica. This period was characterized by low growth of real GDP per worker, moderate real GDP volatility, high but rapidly declining inflation under a fixed exchanged rate regime, high and increasing current account deficits, and moderate government deficits; (v) The period 1995-2005, which coincides with the presidential terms of Zedillo and Fox. This period was characterized by moderate growth rate of real GDP per worker, moderate and declining real GDP volatility, moderate and declining inflation under a flexible exchange rate regime, moderate current account deficits, and moderate government deficits. Table 1 Performance of the Main Macroeconomic Indicators in Mexico: 1950-2005 Period 1950-1970 1971-1982 1983-1988 1989-1994 1995-2005 Annual growth rate of Coefficient of Variation of the real GDP growth real GDP per worker rate 3.99% 0.377 1.07% 0.477 -3.05% 18.175 0.75% 0.355 0.63% 1.263 Annual Consumer Price Index Inflation 5.06% 25.44% 86.71% 15.90% 13.49% Current Account Balance (as a percent of GDP) N.A. N.A. 1.17% -4.93% -1.78% Fiscal Balance (as a percent of GDP) -1.65% -6.89% -10.61% -0.95% -0.58% Sources: World Development Indicators (2007), World Bank, International Financial Statistics (IFS), International Monetary Fund (IMF), Banco de México, and GGCD. According to this characterization, the two most similar episodes during the period 1950-2005 are the two ends: 1950-1970 and 1995-2005. In a way, the Mexican economy seems to have come full circle after fifty years except for two facts: (i) the growth rate of real GDP per worker was significantly higher in the period 1950-1970 than in the period 1995-2005; and (ii) similar inflations have been achieved under two opposite exchange rate regimes, fixed for the period 1950-1970 and floating under the period 1995-2005. Evidently, another major change the Mexican economy has undergone between these two episodes has been the trade liberalization process, which significantly increased the openness of the Mexican economy (as measured, for example, by the ratio of exports plus imports to GDP). At any rate, it should be clear from the table above that the Mexican economy experience five distinctive growth episodes, which will be analyzed next in the growth accounting exercises. 3.2 Economic Growth and Demographics 8 Most of the economics literature on economic growth in Mexico has focused on the hypothesis of convergence (both absolute and relative) across states and regions within Mexico to a common real GDP per capita level. This convergence literature includes, among others, Caraza (1993), Juan Ramón and Rivera Bátiz (1996), Esquivel (1999), Navarrete (1995), Messmacher (2000), García-Verdú, (2005b), Chiquiar (2005), and de la Peza (2006). 6 By contrast, less attention has been given to another important branch of the literature on economic growth, which is the one on the growth accounting of sources of growth methodology. In the case of Mexico this growth accounting literature includes, among others, Santaella (1998a, 1988b), Bosworth (1998), Faal (2005), García-Verdú (2005b), and World Bank (2007). In turn, most of the growth accounting exercises that have been done for the case of Mexico have focused on GDP per capita rather than real GDP per worker. The reason for this is twofold. First, despite its shortcomings as a measure of development, GDP per capita is by far the most widely used indicator of economic wellbeing in comparisons across countries and over time. Second, the time series on employment necessary to perform the growth accounting exercises with real GDP per worker rather than with real GDP per capita are not readily available for most countries. This paper improves upon existing growth accounting exercises in Mexico in three dimensions: (i) it focuses on real GDP per worker rather than on real GDP per capita; (ii) it specifically decomposes the growth rate of GDP per worker that is attributable to the accumulation of human capital by into constructing series for the growth rates of workers of different schooling levels (no schooling, primary completed, secondary completed, and tertiary completed); and (iii) it combines these new time series with improved measurements of factor shares from household survey data for Mexico obtained by García-Verdú (2005a). The result of these three improvements is a more accurate measure of TFP, as well as a different interpretation of the sources of growth in Mexico over the period 1950-2005. 3.2.1. Demographics Most theoretical models of aggregate economic growth are constructed so as to explain the behavior of output per worker or average worker productivity. Nevertheless, most of the empirical literature on growth has analyzed the behavior of GDP per capita rather than GDP per worker. This is a major shortcoming of the empirical analyses, particularly if the behaviors of the employed population and the total population are different. This is typically the 6 One of the most common findings among these papers is that convergence stopped or at least slowed down significantly after 1985. For a detailed survey of the data, methods and results, see de la Peza (2006). 9 case in countries that experience a change in the age structure of their population. As mentioned before, over the course of the twentieth century Mexico experienced major demographic changes, including an increase in the total population by more than sevenfold over the period 1900-2005. Furthermore, there was an important change in the age structure of the Mexican population over the period 1920-2005 (the period for which population data by age groups are available), resulting in the gradual aging of the population. These changes in the age structure of the population are the result of the so called Demographic Transition. This transition consists of the successive changes from: (i) high birth and high death rates; (ii) high birth rates and low death rates; to, finally, (iii) low birth rates and low death rates. Due to the fact that death rates fall before birth rates adjust downwards, countries that undergo the Demographic Transition typically experiment a population bulge. This implies that they will also experience a period of declining dependency ratio, defined as the ratio of the population ages 0 to 14 and 65 and over the population ages 15 to 64. This is a situation favorable to economic growth, since it implies that during a period there will be a large generation or cohort of entrants to the labor force while the generations of younger cohorts that need to be fed but do not yet contribute to production will be smaller. This situation has been denominated the ‘demographic dividend’. This ‘demographic dividend’ is a window of opportunity that eventually vanishes as the share of the population 65 years of age and older begins to rise rapidly. As can be seen in the following figures, Mexico has indeed experienced a falling dependency ratio from 1970 until 2000 (Figure 5). Moreover, according to population projections this dependency ration is expected to continue decreasing until around 2020 due largely to the continuing fall in the fall in the youth dependency ratio (Figure 6). Nevertheless, the rapid aging of the population after 2010 (Figure 7) implies that this window will eventually close (Figure 5). Figure 5 Dependency Ratio in Mexico: 1920-2000 (observed) and 2010-2050 (projected) (Population ages 0-14 and 65+ over population ages 15-64) 10 1.0 1.00 0.92 0.9 0.88 0.82 Ratio 0.8 0.79 0.75 0.73 0.7 0.71 0.64 0.6 0.61 0.54 0.56 0.50 0.5 0.51 2050p 2040p 2030p 2020p 2010p 2000 1990 1980 1970 1960 1950 1940 1930 1920 0.4 Year Source:, Instituto Nacional de Estadística Geografía e Informática (2000), Estadísticas Históricas de México, , XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, and International Data Base, U.S. Census Bureau. N.B. Data for the years marked with a ‘p’ are projections from the U.S. Census Bureau International Data Base. Figure 6 Children and Youth Dependency Ratio in Mexico: 1920-2000 (observed) and 2010-2050 (projected) (Population ages 0-14 over population ages 15-64) 0.923 0.90 0.738 0.761 0.70 Ratio 0.60 0.812 0.851 0.80 0.674 0.662 0.678 0.561 0.50 0.442 0.375 0.40 0.340 0.317 0.30 0.305 0.20 0.10 2050p 2040p 2030p 2020p 2010p 2000 1990 1980 1970 1960 1950 1940 1930 1920 0.00 Year Source:, Instituto Nacional de Estadística Geografía e Informática (2000), Estadísticas Históricas de México, , XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 11 2005, and International Data Base, U.S. Census Bureau. N.B. Data for the years marked with a ‘p’ are projections from the U.S. Census Bureau International Data Base. Figure 7 Old-Age Dependency Ratio in Mexico: 1920-2000 (observed) and 2010-2050 (projected) (Population ages 65+ over population ages 15-64) 0.35 0.30 0.306 0.25 Ratio 0.242 0.20 0.175 0.15 0.124 0.10 0.05 0.099 0.082 0.066 0.074 0.073 0.073 0.053 0.061 0.045 0.051 2050p 2040p 2030p 2020p 2010p 2000 1990 1980 1970 1960 1950 1940 1930 1920 0.00 Year Source: Instituto Nacional de Estadística Geografía e Informática (2000), Estadísticas Históricas de México, XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, and International Data Base, U.S. Census Bureau. N.B. Data for the years marked with a ‘p’ are projections from the U.S. Census Bureau International Data Base. What are implications of the change in the age structure of the population for economic growth and the results of the growth accounting exercises? In order to analyze the importance of changes in the demographic structure, one can begin with the following identity: Y Y L WAP * * P L WAP P where Y is real GDP, P is total population, L is the employed population, and WAP is the working-age population. Thus, real GDP per capita can be expressed as the product of real GDP per worker, a pseudo labor force participation rate7 and the share of the working-age population to the total population. 7 It is a pseudo labor force participation rate since typically employment is divided by the workforce instead of the working-age population. 12 Given that no consistent series are available for the employed population, L, and for the working-age population, WAP, the decomposition done here is simplified as follows: Y Y L * P L P According to this last identity, real GDP per capita can be expressed as the product of real GDP per worker and ratio of the employed population to the total population. As can be seen from the next graph, the behavior of the ratio of the employed population to the total population is far from constant over the period 1950-2005. In fact, it is very similar to the inverse of the dependency ration in Mexico during the same period. Figure 8 Ratio of Employed to Total Populations and Dependency Ratio in Mexico: 1950-2006 Ratio of Employed Population to Total Population (LHS) Dependency Ratio (RHS) 0.40 0.9 0.35 0.30 0.7 Dependency Ratio Ratio of Employed Population to Total Population 0.45 0.25 0.5 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 0.20 Year Sources: Instituto Nacional de Estadística Geografía e Informática (2000), Estadísticas Históricas de México, XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, and Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database. That the ratio of the employed to the total population is not constant implies that the behavior of the real GDP per capita and the real GDP per worker will differ. In effect, as shown in the following figure, the behavior of the two series is significantly different. Given that the data are in logs, the slopes in the graphs show the growth rates. Thus, one can see that real GDP per worker: (i) grew at a faster rate than GDP per capita from 1950 up until 1973; (ii) declined more sharply than GDP per capita than from 1981 to 1995; and (iii) grew at a lower rate than GDP per capita from 1995 up until 2006. 13 Thus, the usual story of the growth rate of real GDP per capita in Mexico falling after the 1982 crisis changes when analyzing real GDP per worker: (i) the growth performance of the 1950-1970 period is all the more impressive considering it coincided with the period of peak population growth (1960-1970), which explains why real GDP per capita grew at a slower rate than real GDP per worker; (ii) in contrast to the growth rate of real GDP per capita, the growth rate of real GDP per worker began to slow down around the year 1973, not after 1981 as commonly noted; (iii) the or period of renewed growth after the 1982 crisis is absent when one analyzes real GDP per worker; as a result, the level of real GDP per worker never again reached its pre-1981 level; and (iv) the observed growth rates of real GDP per worker after 1981 never matched those observed between 1950 and 1970. Figure 9 Real GDP per Capita and Real GDP per Worker in Mexico: 1950-2006 Real GDP per Worker (LHS axis) Real GDP per Capita (RHS axis) 9.4 9.2 10.2 9.0 10.0 8.8 9.8 8.6 9.6 8.4 9.4 Real GDP per Worker (2006 EKS$) Real GDP per Capita (2006 EKS$) 10.4 8.2 8.0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 9.2 Year Source: Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database, and Penn World Table Version 6.2. These arguments can be formalized through a simple decomposition of the growth rate of real GDP per worker. Recall the previous formula: 14 Y Y L * P L P Once can the take logs and differentiate with respect to time to find an expression in terms of growth rates: Y Y L ln ln * ln P L P g y g yL gL gP In effect, the favorable demographic conditions characterized by a falling dependency ratio have contributed to the renewed growth in real GDP per capita, despite the fact that real GDP per worker has not grown significantly. Table 2 Growth Decomposition of Growth of real GDP in Mexico: 1950-2006 Period Annual growth Annual growth rate of real GDP rate of real GDP Annual growth Annual growth rate of the rate of the total employed 1950-1970 1971-1982 1983-1987 1988-1994 1995-2005 per capita 3.01% 3.42% -2.26% 1.62% 1.52% per worker 3.99% 1.07% -3.22% 0.32% 0.63% population 3.08% 2.55% 2.24% 1.85% 1.31% population 2.10% 4.90% 3.20% 3.14% 2.20% Annual growth rate of the ratio of the employed over total population -4.06% -0.20% -1.28% -0.56% -0.43% Source: Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database. Table 3 Growth Decomposition of Growth of real GDP in Mexico: 1950-2006 (Percent Contributions) Period Percent Percent contribution to contribution of the growth rate of the growth rate of real GDP per real GDP per capita worker 1950-1970 100.00% 132.52% 1971-1982 100.00% 31.35% 1983-1987 100.00% -142.37% 1988-1994 100.00% 20.07% 1995-2005 100.00% 41.63% Percent Percent contribution to contribution to the employed the the total population 102.37% 74.41% 99.05% 114.42% 86.49% population 69.85% 143.05% 141.42% 194.35% 144.85% Percent contribution to the ratio of the employed over total population 134.89% 5.76% 56.68% 34.49% 28.12% Source: Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database. 3.2.2. Human Capital Accumulation and Total Factor Productivity 15 This section improves upon the standard growth accounting exercises which decompose the growth rate of real GDP per worker into the contributions of physical capital, labor and total factor productivity in two ways: (i) it focuses on real GDP per worker rather than on real GDP per capita; (ii) it accounts for the contribution of human capital to the growth of real GDP per worker through the incorporation of different types of labor according to their educational attainment (no schooling, primary completed, secondary completed, and tertiary completed); and (iii) it combines these new time series with improved measurement of factor shares from household survey data for Mexico obtained by García-Verdú (2005a). As a result, the measure of TFP obtained from this growth accounting exercise is much more accurate than previous time series for this variable. Also, the interpretation of the sources of growth in Mexico over the period 1950-2005 is different from that obtained if: (i) real GDP per capita is used instead of real GDP per worker; (ii) only capital and labor are used as inputs, and (iii) if factor shares from National Income and Product Accounts are used instead of factor shares from household survey data. The measures of human capital are based on the data set by Barro and Lee (2001) on educational attainment in a cross section of countries. Their measures of educational attainments are based on decennial census data as well as data from UNESCO. Their measures present the shares of the population 25 years of age and older by schooling level for four different types: (i) no schooling; (ii) completed primary; (iii) completed secondary; and (iv) completed tertiary. These data set was complemented with data from the latest population censuses (XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005) since they haven’t been updated since 1995. The following figure shows the shares of the population 25 years of age and older by schooling level in Mexico over the period 1950-2005: Figure 10 Schooling Attainment in Mexico: 1950-2005 (Percentage of the population 25 years of age and older with given schooling level completed) 16 No schooling Primary Secondary Tertiary 100% 90% 80% 70% Percent 60% 50% 40% 30% 20% 10% 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 0% Year Sources: XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, Instituto Nacional de Estadística Geografía e Informática, and Barro and Lee (2001). For expositional purposes, the growth accounting or decomposition exercise can be derived from a Cobb-Douglas production function of the form: Yt At K t * HC1, t1 * HCs, ts * HC3,ts * HC4,4t ln Yt ln At ln K t 1 ln( HC1,t ) 2 ln( HC2, t ) 3 ln( HC3,t ) 4 ln( HC4,t ) g y g A g K g HC1 g HC 2 g HC 3 g HC 4 where, as before, Yt is real GDP, At is total factor productivity, K t is a measure of the capital stock, is the share of GDP paid to capital, HCi is the human capital stock corresponding to educational attainment level i, and i is the share of GDP paid to human capital of educational attainment level i, where the educational attainment level i can be: (i) no schooling; (ii) completed primary; (iii) completed secondary; or (iv) completed tertiary. The stocks of human capital are such that: Lt HC1,t HC2,t HC3,t HC4,t In order to obtain a measure of the capital stock the time series on gross investment is combined using the perpetual inventory method, assuming a 5% annual depreciation rate and a steady state level of capital in 1950. In particular, the measure of the capital stock is obtained according to the following law of motion for capital and initial condition: 17 K t 1 I t K t (1 ) I1950 0.05 K0 In order to obtain the factor shares, we use the results of García-Verdú (2005a) and Gollin (2003), which showed that factor shares obtained from National Income and Product Accounts are biased so that the share of labor is systematically underestimated while that of capital is overestimated. Instead, we use the factor shares for capital and labor obtained by García-Verdú (2005a) for Mexico from household survey data, which correspond to roughly 0.4 and 4 i 1 i 0.6 . In the case of the factor shares of the different types of human capital, i , we use the fact that the returns to education tend to be relatively constant over time and assume that the average real wage in the economy is equal to 60% of real GDP per worker (observed). Furthermore, in order to obtain factor shares for each type of human capital we assume that: (i) workers with completed secondary education earn the average wage in the economy; (ii) workers with no schooling earn 20% of the average wage in the economy; (iii) workers with completed primary education earn 50% of the average wage in the economy; and (iv) workers with completed tertiary education earn 200% of the average wage in the economy. These assumptions are then combined with the observed number of workers by each education level as a share of total employment in order to obtain their share in the total wage bill. The average shares over the period 1950-2006 are 1 7.8% , 2 27.8% , 3 13.7% , and 4 10.6% . Nevertheless, these shares fluctuate significantly over the period as a result of the changes in the composition of the stock of human capital by education level, as can be seen in the following figure: Figure 11 Income Shares among Workers by Schooling level in Mexico: 1950-2005 (Percentage of GDP paid to workers in each schooling level) 18 No schooling Primary Secondary Tertiary 100% 90% 80% 70% Percent 60% 50% 40% 30% 20% 10% 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 0% Year Sources: XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, Instituto Nacional de Estadística Geografía e Informática, and Barro and Lee (2001). The result of this growth accounting exercise or sources of growth decomposition is presented in the table below. Table 4 Sources of Growth of real GDP in Mexico: 1950-2006 Period Annual growth Annual growth Annual growth rate of the rate of the capital employed population with 1950-1970 1971-1982 1983-1987 1988-1994 1995-2006 1950-2006 rate of real GDP 6.10% 5.97% -0.02% 3.46% 2.83% 4.49% stock 1.67% 2.54% 0.78% 1.27% 1.37% 1.66% no schooling -4.02% -2.14% -6.93% -5.06% -1.36% -3.44% Annual growth rate of the employed population with primary completed -1.23% -9.73% -8.98% -8.34% -8.88% -6.27% Annual growth rate of the employed population with secondary completed 2.34% 5.15% 10.90% 12.48% 6.32% 5.83% Annual growth rate Annual growth rate of the employed of total factor population with tertiary completed 3.54% 8.66% 7.11% 3.50% 5.68% 5.41% productivity 3.80% 1.49% -2.90% -0.39% -0.30% 1.30% Sources: Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database, Penn World Table Mark 6.1, XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, Instituto Nacional de Estadística Geografía e Informática, and Barro and Lee (2001). Table 5 Sources of Growth of real GDP in Mexico: 1950-2006 (Percent contributions) Period Annual growth Annual growth Annual growth rate of the rate of the capital employed population with 1950-1970 1971-1982 1983-1987 1988-1994 1995-2006 1950-2006 rate of real GDP 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% stock 27.40% 42.60% N.A. 36.74% 48.54% 37.04% no schooling -65.93% -35.89% N.A. -146.04% -48.06% -76.49% Annual growth rate of the employed population with primary completed -20.24% -162.92% N.A. -240.72% -314.13% -139.59% 19 Annual growth rate of the employed population with secondary completed 38.44% 86.25% N.A. 360.43% 223.37% 129.69% Annual growth rate Annual growth rate of the employed of total factor population with tertiary completed 58.02% 145.04% N.A. 100.94% 200.86% 120.35% productivity 62.30% 24.92% N.A. -11.35% -10.59% 29.00% Sources: Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database, Penn World Table Mark 6.1, XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, Instituto Nacional de Estadística Geografía e Informática, and Barro and Lee (2001). Tables 4 and 5 above suggest that physical capital, human capital and TFP growth accounted for about a third each of the observed growth in real GDP. Within human capital, the no schooling and primary completed stocks actually contributed negatively to the growth of real GDP, although the increases in the secondary and tertiary completed schooling levels more than offset the negative contributions of no schooling and primary. This growth accounting exercise shows that the contribution of physical capital to real GDP growth is much smaller than suggested by previous analyses (cf. Elías, 1992). Even after accounting for the contributions of four types of human capital to the growth of real GDP growth, total factor productivity continues having an important share. This finding contrasts with the results by Young (1992, 1994, and 1995), who find that for several South East Asian economies factor accumulation accounted for most of the observed growth in real GDP. Figure 12 Total Factor Productivity in Mexico with and without accounting for Human Capital Accumulation: 1950-2006 TFP with Human Capital TFP without Human Capital 5.6 Ln of TFP Index (1950=100) 5.4 5.2 5.0 4.8 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 4.6 Year Sources: Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database, Penn World Table Mark 6.1, XII Censo General de Población y Vivienda 2000, II Conteo de Población y Vivienda 2005, Instituto Nacional de Estadística Geografía e Informática, and Barro and Lee (2001). 3.3 Valuing the Contributions of Health Improvements to Economic Growth 20 En fechas recientes, Becker, Philipson y Soares (2005), Murphy y Topel (2003), y Norhaus (2003) han extendido el principio de los diferenciales compensatorios al estudio de la salud. En particular, estos autores han desarrollando una metodología para valuar en términos monetarios los aumentos en la esperanza de vida. Estos trabajos coinciden en encontrar que las ganancias debidas al aumento en la esperanza de vida en las últimas décadas son responsables de cerca de la mitad o más del aumento en su medida de ingreso ampliado (full income), la cual incluye tanto al ingreso monetario como a la valuación en términos monetarios de los aumentos en la esperanza de vida. La evidencia empírica de estas ganancias se obtiene a partir tanto de una muestra amplia de países como de regiones y estados al interior de algunos de ellos. A continuación se reproduce el modelo propuesto originalmente por Becker, Philipson y Soares (2005). Ello con el fin de ilustrar lo que se considera una medida de desarrollo que incorpora las ganancias en la esperanza de vida de una forma adecuada desde un punto de vista teórico. Además, se realiza un ejercicio empírico a partir de este modelo para valuar las ganancias observadas en esperanza de vida durante el periodo 1970-1995 para el caso de las entidades federativas en México. El modelo parte de suponer que las preferencias de las personas por consumo y salud, representada esta última por la esperanza de vida, se pueden representar a través de una función de utilidad indirecta V (Y , T ) , definida como: T V (Y , T ) max e t u[c(t )]dt {c ( t )} 0 donde Y es una medida del ingreso total a través del ciclo de vida (lifetime income), T es la esperanza de vida al nacer, y(t) es el ingreso en el periodo t, c(t) es el consumo en el periodo t, es la tasa subjetiva de descuento, con 0<y u[c(t)] es la función de utilidad instantánea. Las personas buscan maximizar la función de utilidad intertemporal (esto es, la suma descontada de utilidades instantáneas) sujeto a la siguiente restricción presupuestal: T T 0 0 Y e r t y (t )dt e r t c(t )dt donde r es la tasa de interés. Esta restricción supone la existencia de mercados financieros perfectos, que le permiten a los individuos prestar o pedir prestado a una tasa fija de interés r. Un resultado bien conocido es que bajo este supuesto, y dadas las preferencias del consumidor por suavizar su perfil de consumo a través del tiempo, reflejadas en una tasa subjetiva de descuento igual a la tasa de interés (r, el consumo será constante. Estos supuestos permiten simplificar 21 la función de utilidad indirecta, ya que si el consumo es constante (c(t)=c) la utilidad instantánea también será constante (u[c(t)]=u(c)), de manera que: T V (Y , T ) u (c) max e t dt 0 V (Y , T ) u (c) A(T ) donde A(T ) [1 e rT ] / r . Ahora considérese a un mismo individuo en dos momentos del tiempo, con ingreso total a través del ciclo de vida y esperanza de vida denotados por Y y T, y Y’ y T’, respectivamente. El objetivo de este modelo es determinar el nivel de ingreso inframarginal W(T,T’) que le daría a este individuo el mismo nivel de utilidad en el segundo momento del tiempo, pero con la esperanza de vida experimentada en el primer momento, esto es: V (Y 'W (T ,T ' ),T ) V (Y ' ,T ' ). Dados los supuestos anteriores que simplifican la expresión de la función de utilidad indirecta, se puede definir análogamente a w(T,T’) como el nivel de ingreso inframarginal en un momento del tiempo tal que le daría a este individuo el mismo nivel de utilidad en el segundo momento del tiempo, pero con la esperanza de vida experimentada en el primer momento. Esto es: u ( y ' w(T ,T ' )) A(T ) u ( y ' ) A(T ' ). Una vez introducida esta definición, se puede encontrar el valor monetario de las ganancias en bienestar totales observadas en un periodo (esto es, ingreso ampliado o full income), expresadas en términos del ingreso anual, como: y ' y w(T ,T ' ). De manera análoga, el valor monetario de las ganancias en esperanza de vida puede expresarse en términos de su contribución a la medida de ingreso ampliado como: w(T , T ' ) . y ' y w(T , T ' ) Para encontrar w(T ,T ' ) es posible despejar la ecuación que relaciona a la utilidad instantánea en dos momentos del tiempo para obtener: u ( y ' ) A(T ' ) y '. w(T ,T ' ) u 1 A(T ) 22 Para obtener valuaciones monetarias de las ganancias en la de esperanza de vida a partir de los datos observados, es necesario parametrizar la función de utilidad y calibrar los parámetros del modelo. Para el ejercicio empírico utilizando los datos observados durante el periodo 1970–2000 para las entidades federativas en México, se sigue la parametrización sugerida por Becker, Philipson y Soares (2005). En particular, se supone que la función de utilidad instantánea toma la siguiente forma: 1 u (c ) c 1 1 1 donde es la elasticidad intertemporal de sustitución y el parámetro determina el nivel de consumo anual en el cual los individuos estarían indiferentes entre estar vivos o estar muertos, y surge de normalizar la función de utilidad a cero en el caso de que los individuos mueran. De esta función de utilidad se puede encontrar una expresión para como función de el nivel de consumo c, la elasticidad intertemporal de sustitución , y la elasticidad instantánea de la función de utilidad , como: 1 c donde 1 1 1 1 1 u ' ( c )c . u (c ) Dado que no existen estimaciones de los parámetros o para el caso de México, se utilizan los mismos parámetros que en el estudio de Becker, Philipson y Soares (2005), los cuales a su vez provienen de la literatura económica y son estimados utilizando datos de los Estados Unidos por Murphy y Topel (2003) y Browning, Hansen y Heckman (1999). En particular, se toman y c=$26,365, lo cual implica que . Al igual que los autores anteriores, se supone que la tasa de interés r es igual a 0.03. Para obtener el valor monetario de los aumentos observados en la esperanza de vida se utilizaron los datos de esperanza de vida al nacer por entidad federativa publicados por el CONAPO. Para el caso del PIB per capita se utilizó la serie de Esquivel [1999], la cual a su vez proviene de los datos quinquenales del PIB y los datos censales de población por entidad federativa del INEGI. Es importante subrayar que el nivel de consumo c utilizado para obtener el parámetro está expresado en dólares, y corresponde al valor del ingreso per capita en Estados Unidos en 1990 según la World Penn Table Versión 6.1. 23 Becker, Philipson y Soares (2005) decidieron utilizar este año ya que es el mismo año para el cual Murphy y Topel (2003) estiman el parámetro . Para hacer compatible la calibración de los parámetros del modelo con los datos del PIB per capita de las entidades federativas en México, se transformaron los datos del PIB per capita real de Esquivel (1999) de manera que el promedio nacional del PIB per capita en 1995 coincidiera con el dato para el PIB real per capita (expresado en dólares constantes de 1996) para ese mismo año según la World Penn Table Versión 6.1. Los datos para 1970 se obtuvieron aplicando la tasa de crecimiento del PIB per capita real entre 1970 y 1995 obtenida a partir de los datos de Esquivel (1999) a los datos de 1995 expresados en dólares. Los datos anteriores se presentan en la Gráfica 3, además de que se muestran los resultados de ajustar sendas funciones logarítmicas a los datos de 1970 y 1995. Como puede apreciarse, se ha registrado un aumento significativo en la esperanza de vida al nacer, particularmente para las entidades con el PIB per capita más bajo. Los resultados de este ejercicio para el caso de las entidades federativas en México durante el periodo 1970–1995 se encuentran en el Cuadro 2. En las primeras tres columnas se muestra la esperanza de vida al nacer en 1970, en 1995 y el cambio (en número de años) entre estos dos periodos. Las siguientes tres columnas muestran el PIB per capita, expresado en pesos constantes de 1995 en 1970, en 1995 y el cambio (todos convertidos a dólares) entre estos dos periodos. Las últimas dos columnas muestran el valor monetario del aumento en la esperanza de vida al nacer expresado en dólares constantes de 1996, así como la contribución porcentual del valor monetario del aumento en la esperanza de vida al nacer a la medida de ingreso aumentado (full income). Como puede apreciarse, el aumento promedio en la esperanza de vida al nacer entre 1970 y 1995 fue de más de once años. De acuerdo al modelo propuesto, este aumento equivale en términos de dólares constantes de 1996 a un aumento de cerca de $1000 dólares, lo que a su vez contribuyó más del 50 por ciento al aumento en el registrado por la medida de ingreso ampliado durante este periodo (último renglón). Más aún, existe una gran variación entre entidades en términos de la contribución que tuvo el aumento en términos monetarios de la esperanza de vida al nacer a la medida de ingreso ampliado. Así, por ejemplo, todo el aumento en la medida de ingreso ampliado para el Estado de México entre 1970 y 1995 provino de la contribución del aumento en la esperanza de vida, ya que el PIB per capita disminuyó. Algo similar ocurrió con los estados de Baja California, Baja California Sur, Nayarit y Veracruz. Todos estos casos ejemplifican como el bienestar, medido a través del ingreso ampliado, continuó aumentando inclusive durante el periodo de bajo crecimiento 24 del PIB per capita registrada durante la década de los ochenta y noventa. Ello fue posible gracias a que la esperanza de vida al nacer aumentó significativamente durante todo el periodo entre 1970 y 1995. Este ejercicio muestra la importancia de las ganancias en la esperanza de vida en términos monetarios, además de que ilustra una manera de incorporar estas ganancias a una medida de ingreso ampliado de una manera microfundamentada. 4. Conclusions The results of the paper show that over the period 1950-2005: (i) the demographic changes registered in Mexico are key in explaining its economic growth performance, and the discrepancy between the growth rates of GDP per capita and GDP per worker; (ii) the growth rate in the capital stock accounts for about one third of the observed growth in real GDP per worker, the observed increases in educational attainment account for nearly one third, while the growth in total factor productivity accounts for the remaining third; and (iii) the observed increases in life expectancy at birth have been a major contributor to improvements in welfare, accounting for nearly half of the increase in a measure of augmented or full income. 5. References Data References Barro, Robert J., and Jong-Wha Lee (2001), “International Data on Educational Attainment: Updates and Implications,” Oxford Economic Papers, Vol. 53, No. 4, July 2001, pp. 541-563. Data are available at: http://www.cid.harvard.edu/ciddata/ciddata.html Groningen Growth and Development Centre (GGDC) and the Conference Board (2007), Total Economy Database, University of Groningen, January 2007. Data are available at: http://www.ggdc.net Heston, Alan, Robert Summers, and Bettina Aten (2006), Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006. Data are available at: http://pwt.econ.upenn.edu Instituto Nacional de Estadística, Geografía e Informática (2006), II Conteo de Población y Vivienda 2005, Instituto Nacional de Estadística, Geografía e Informática, Aguascalientes, Aguascalientes, Mexico. Data are available at: http://www.inegi.gob.mx/est/default.aspx?c=6789 25 Instituto Nacional de Estadística, Geografía e Informática (2001), XII Censo General de Población y Vivienda 2000, Instituto Nacional de Estadística, Geografía e Informática, Aguascalientes, Aguascalientes, Mexico. Data are available at: http://www.inegi.gob.mx/est/default.aspx?c=4888 Instituto Nacional de Estadística, Geografía e Informática (2000), Estadísticas Históricas de México, Instituto Nacional de Estadística, Geografía e Informática, Aguascalientes, Aguascalientes, Mexico. Data are available at: http://biblioteca.itam.mx/recursos/ehm.html Maddison, Angus (2003), The World Economy: A Millennial Perspective, Organisation for Economic Co-Operation and Development, OECD Development Centre, Paris, France. Maddison, Angus (2001), The World Economy: Historical Statistics, Organisation for Economic Co-Operation and Development, OECD Development Centre, Paris, France. World Bank (2007), World Development Indicators 2007, World Bank, Washington DC. Data are available at: http://devdata.worldbank.org/dataonline/ General References on Economic Growth Barro, Robert J. (1999), “Notes on Growth Accounting,” Journal of Economic Growth, Vol. 4, No. 2, June 1999, pp. 119-137. Barro, Robert J. (1997), Determinants of Economic Growth: A Cross-Country Empirical Study, Cambridge, MA: MIT Press. Barro, Robert J., and Xavier Sala-i-Martin (2004), Economic Growth, 2nd edition, Cambridge, MA: The MIT Press. Helpman, Elhanan (2004), The Mystery of Economic Growth, Cambridge, MA: Belknap Press of Harvard University Press. Gollin, Douglas (2002), “Getting Income Shares Right,” Journal of Political Economy, Vol. 110, No. 2, April 2002, pp. 458-474. Griliches, Zvi (2000), R&D, Education and Productivity: Retrospective, Cambridge, MA: Harvard University Press. A Personal Hall, Robert E. and Charles I. Jones (1999), “Why Do Some Countries Produce So Much More Output Per Worker Than Others?” Quarterly Journal of Economics, Vol. 114, Issue 1, February 1999, pp. 83-116. 26 Mankiw, N. Gregory, David Romer and David N. Weil (1992), “A Contribution to the Empirics of Economic Growth,” Quarterly Journal of Economics, Vol. 107, Issue 2, May 1992, pp. 407-37. Santos, Manuel S. (2002), “On some criteria for the formulation and testing of economic growth models,” Spanish Economic Review, Vol. 4, Issue 1, March 2002, pp. 1-18. Young, Alwyn (1995), “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience,” Quarterly Journal of Economics, Vol. 110, No. 3, August 1995, pp. 641-680. Young, Alwyn (1994), “Lessons from the East Asian NICs: A Contrarian View,” European Economic Review, Vol. 38 (1994), pp. 964-973. Young, Alwyn (1992), “A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore,” NBER Macroeconomics Annual 1992, MIT Press, Cambridge, MA. References on Economic Growth and Demography Bloom, David E. and David Canning (2006), “Demographic Challenges, Fiscal Sustainability and Economic Growth,” in Economic Growth, Proceedings from a G-20 Seminar held in Pretoria, South Africa, on August 4-5, 2005, South African Reserve Bank, Banco de México and The People’s Bank of China. Bloom, David E. and David Canning (2003a), “Contraception and the Celtic Tiger,” Economic and Social Review, Vol. 34, pp. 229-247. Bloom, David E. and David Canning (2003b), “How Demographic Change can Bolster Economic Performance in Developing Countries,” World Economics, Vol. 4, No. 4, pp. 1-14. Bloom, David E., David Canning and Jaypee Sevilla (2003c), “The Demographic Dividend: A New Perspective on the Economic Consequences of population Change,” Population Matters Monograph MR-1274, RAND, Santa Monica, CA. Weil, David N. (1993), “The economics of population aging,” in Mark R. Rosenzweig and Oded Star, (eds.), Handbook of Population and Family Economics, edition 1, Vol. 1, Ch. 17, pp. 967-1014, Amsterdam: North-HollandElsevier References on Economic Growth and Health 27 Acemoglu, Daron and Simon Johnson (2006), “Disease and Development: The Effects of Life Expectancy on Economic Growth,” NBER Working Paper No. 12269, National Bureau of Economic Research, Cambridge, MA. Becker, Gary S., Tomas J. Philipson, and Rodrigo R. Soares (2005), “The quantity and quality of life and the evolution of world inequality,” American Economic Review, Vol. 95, No. 1, March 2005, pp. 277-291. Bloom, David E., David Canning, and Jaypee Sevilla (2004), “The Effect of Health on Economic Growth: A Production Function Approach,” World Development, Vol. 32, pp. 1-13. Bloom, David E. and David Canning (2003d), “The Health and Poverty of Nations: From Theory to Practice,” Journal of Human Development, Vol. 7, pp. 47-71. Bloom, David E. and David Canning (2003e), “Health as Human Capital and its Impact on Economic Performance,” Geneva Papers on Risk and Insurance, Vol. 28, pp. 304-315. Cutler, David M. and Elizabeth Richardson (1997), “Measuring the health of the U.S. population,” Brookings Paper on Economic Activity: Special Issue on Microeconomics, pp. 217-271. Shastry, Gauri Kartini and David N. Weil (2003), “How Much of Cross-Country Income Variation is Explained By Health?,” Journal of the European Economic Association, Vol. 1, No. 2-3, April-May 2005, pages 387-396. Soares, Rodrigo R. (2005), “Health and inequality in Latin America and the Caribbean,” mimeo, University of Maryland, April 2005. Murphy, Kevin M. and Robert H. Topel (2003), “The economic value of medical research,” in Kevin M. Murphy and Robert H. Topel (eds.) Measuring the gains from medical research: An economic approach, The University of Chicago Press, Chicago, IL. Nordhaus, William D. (2003), “The health of nations: The contribution of improved health to living standards,” in Kevin M. Murphy and Robert H. Topel (eds.) Measuring the gains from medical research: An economic approach, The University of Chicago Press, Chicago, IL. Philipson, Tomas J. and Rodrigo R. Soares (2002), “World inequality and the rise in longevity,” en Boris Pleskovic and Nicholas Stern (eds.) Annual World Bank conference on development economics 2001/2002, The World Bank and Oxford University Press, Washington, DC. 28 Pritchett, Lant and Lawrence H. Summers (1986), “Wealthier is Healthier,” Journal of Human Resources, Vol. 31, No. 4, pp. 841-68. Soares, Rodrigo R. (2007), “Health and the Evolution of Welfare across Brazilian Municipalities,” Journal of Development Economics, forthcoming. Weil, David N. (2005), “Accounting for the Effect of Health on Economic Growth,” NBER Working Papers 11455, National Bureau of Economic Research, Cambridge, MA. Forthcoming, Quarterly Journal of Economics. References on Economic Growth in Latin America and the Caribbean Carpena, Luciane, and Manuel S. Santos (2000), “Economic Growth in Some Latin American and OECD Countries, 1960–1990,” Unpublished manuscript, Department of Economics, University of Minnesota, September 2000. Cole, Harold L., Lee E. Ohanian, Alvaro Riascos, and James A. Schmitz, Jr. (2005), “Latin America in the rearview mirror,” Journal of Monetary Economics, Vol. 52, No. 1, January 2005, pp. 69-107. De Gregorio, José (2006) “Economic Growth in Latin America: From the Disappointment of the Twentieth Century to the Challenges of the Twenty-First,” Working Papers Central Bank of Chile 377, Santiago, Chile: Central Bank of Chile. De Gregorio, José (1992) “Economic Growth in Latin America,” Journal of Development Economics, Vol. 39, Issue 1, July 1992, pp. 59-84. Easterly, William, Norman Loayza, and Peter Montiel (1997), “Has Latin America’s Growth Been Disappointing,” Journal of International Economics, Vol. 43, No. 3-4, December 1997, pp. 287-311. Elías, Víctor J. (1992), Sources of Growth: A Study of Seven Latin American Economies, San Francisco, CA: ICS Press. Fernández-Arias, Eduardo, Rodolfo Manuelli, and Juan S. Blyde (2006), Sources of Growth in Latin America. What is Missing? Washington, DC: Inter-American Development Bank. 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