Download Figure 1.1 The Parade of World Income

Figure 1.1 The Parade of World
Income
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-1
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-2
Growth and Development: The Questions
Cross-Country Income Di¤erences
Cross-Country Income Di¤erences
Daron Acemoglu (MIT)
Economic Growth Lecture 1
October 25, 2012.
2 / 15
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-3
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-4
Introduction to Modern Economic Growth
10
USA
LUX
log consumption per capita 2000
6
7
8
9
ISL
AUS
GBR
HKG
DNK
AUT
NOR
GER
CHE
IRL
NLD
BRB
CAN
JPN
FRA
FIN
ITA
NZL BEL
ESP
SWE
GRC
MUS
ISR
PRT
TTO CZE
MAC
SVN
KOR
ARG
URY
SYC
HUN KNA
MEX
POL
CHLSVK
ATG
EST
GAB
TUN
LTU
HRV
RUS
LVA
ZAF
BLZ
TUR
LCA
BRA
KAZ
BLR
LBN
MKD
BGR
GRD
VENDMA
SLV
PAN
ROM
IRN
EGY
GEO
COL
DOM
CRI THA
VCT
GTMPRY
SWZ
PER
CPV
MAR
ALB
MYS
DZA
UKR
ARM
GINLKA
GNQ
PHL
JOR
SYR
IDN
BOL
MDA AZE ECU
KGZ JAM
CHN
NICCMRZWE
PAK
HND
CIV
SEN
COM
BGD
IND
GMB
GHA COG
MOZBEN
KEN
NPL
TJK
STP LSO
UGA
MDG
RWA
TCD
MLI
MWI
BFA
NER
ZMB
TGO
BDI
GNB
ETH YEM
TZA
5
NGA
6
7
8
9
log gdp per capita 2000
10
11
Figure 1.5. The association between income per capita and consumption per capita in 2000.
1.2. Income and Welfare
Should we care about cross-country income differences? The answer is undoubtedly yes. High income levels reflect high standards of living. Economic growth
might, at least over some range, increase pollution or raise individual aspirations, so
that the same bundle of consumption may no longer make an individual as happy.
But at the end of the day, when one compares an advanced, rich country with a
less-developed one, there are striking differences in the quality of life, standards of
living and health.
Figures 1.5 and 1.6 give a glimpse of these differences and depict the relationship
between income per capita in 2000 and consumption per capita and life expectancy
at birth in the same year. Consumption data also come from the Penn World
8
Figure 1.6 The Distribution of
Growth Rates, 1970–2005
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-5
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-6
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-7
12
Introduction to Modern Economic Growth
LUX
11
IRL
USA
NOR NLD
ITA BEL
CAN
AUS
AUT
FINFRA DNK
SWE CHE
ISL
GBR
ESP ISR
NZL
JPN
KOR
GRC
PRT
BRB
MUS
MYS
TTO
ARG
CHLMEX
SYC
ZAF
URY
BRA IRN
VEN
GAB
DOMPAN JOR
SYR
TUR
CRI
EGY
GTM SLV
MAR ECU COL
PRY
PER
PHL
JAM
BOL
HND
GIN
NIC
log gdp per worker 2000
8
9
10
HKG
THA
ROM IDN
PAK
IND
CHN
CPV
LKA
BGD
ZWE
CIV
COG
LSO NPL
MWI
7
GNB
BFA
UGA
ETH
CMR
COM
SEN
GHA
GMB
ZMB
TCD
BEN
KEN
TGO MOZ
MLI
MDG
NER
RWA
NGA
TZA BDI
6
7
8
9
log gdp per worker 1960
10
Figure 1.9. Log GDP per worker in 2000 versus log GDP per worker
in 1960, together with the 45◦ line.
observations for all countries going back to 1820. Finally, while these data do include
a correction for PPP, this is far less reliable than the careful price comparisons used
to construct the price indices in the Penn World tables. Nevertheless, these are the
best available estimates for differences in prosperity across a large number of nations
going back to the 19th century.
Figures 1.10 shows the estimates of the distribution of countries by GDP per
capita in 1820, 1913 (right before World War I) and 2000. To facilitate comparison,
the same set of countries are used to construct the distribution of income in each
date. The distribution of income per capita in 1820 is relatively equal, with a very
small left tail and a somewhat larger but still small right tail. In contrast, by 1913,
there is considerably more weight in the tails of the distribution. By 2000, there are
much larger differences.
15
10
Introduction to Modern Economic Growth
UK
South Korea
Spain
Brazil
Singapore
Guatemala
Botswana
India
7
log gdp per capita
8
9
USA
6
Nigeria
1960
1970
1980
year
1990
2000
Figure 1.8. The evolution of income per capita in the United States,
United Kingdom, Spain, Singapore, Brazil, Guatemala, South Korea,
Botswana, Nigeria and India, 1960-2000.
we will see that there is a lot of truth to this simple calculation; see Figures 1.8,
1.11 and 1.13).
In fact, even in the historically-brief postwar era, we see tremendous differences
in growth rates across countries. This is shown in Figure 1.7 for the postwar era,
which plots the density of growth rates across countries in 1960, 1980 and 2000. The
growth rate in 1960 refers to the (geometric) average of the growth rate between
1950 and 1969, the growth rate in 1980 refers to the average growth rate between
1970 and 1989 and 2000 refers to the average between 1990 and 2000 (in all cases
subject to data availability; all data from Penn World tables). Figure 1.7 shows
that in each time interval, there is considerable variability in growth rates; the
cross-country distribution stretches from negative growth rates to average growth
rates as high as 10% a year.
12
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-8
Introduction to Modern Economic Growth
as
ln yt ' (1 + β) ln yt−1 + εt .
Figure 1.9 showed that the relationship between log GDP per worker in 2000 and
log GDP per worker in 1960 can be approximated by the 45◦ line, so that in terms
of this equation, β should be approximately equal to 0. This is confirmed by Figure
1.14, which depicts the relationship between the (geometric) average growth rate
between 1960 and 2000 and log GDP per worker in 1960. This figure reiterates
that there is no “unconditional” convergence for the entire world over the postwar
.06
period.
HKG
KOR
.04
THA
annual growth rate 1960-2000
0
.02
CHN
JPN
MUS
MYS
ROM
PAK
IND
COG
NPL
GNB
UGA
BFA
TZA
ETH
CPV
LKA
BGD
PAN
IRN CHL
TTO
MEX
ECU GTMJOR
CIV
PHL
GMB
ZAF
URY
PRY
KEN
GHA
COL
SLV
CRI
BEN
GIN
HND
CMR
TGO
JAM
RWA
PER
BOL
COM
SEN
TCD
MOZ
MDG
ZMB
MLI
NER
NGA
NIC
ZWE
LUX
ISL
GBRDNK USA
NLD
SWE
AUS
CAN
CHE
ARG
NZL
VEN
-.02
BDI
PRT
BRB
ESP
GRC
AUT
ITA
SYR
FIN
GAB
TUR
ISR
BEL
FRA
EGYDOM BRA
NOR
MAR
SYC
IDN
LSO
MWI
IRL
6
7
8
9
log gdp per worker 1960
10
Figure 1.14. Annual growth rate of GDP per worker between 1960
and 2000 versus log GDP per worker in 1960 for the entire world.
While there is no convergence for the entire world, when we look among the
(original) OECD nations, we see a different pattern. Figure 1.15 shows that there is
a strong negative relationship between log GDP per worker in 1960 and the annual
21
Introduction to Modern Economic Growth
growth rate between 1960 and 2000 among the OECD countries. What distinguishes
this sample from the entire world sample is the relative homogeneity of the OECD
countries, which have much more similar institutions, policies and initial conditions
than the entire world. This suggests that there might be a type of conditional
convergence when we control for certain country characteristics potentially affecting
economic growth.
JPN
.04
IRL
PRT
LUX
ESP
GRC
annual growth rate 1960-2000
.01
.02
.03
AUT
ITA
FIN
FRA
BEL
NOR
ISL
GBR
USA
DNK
SWE
NLD
AUS
CAN
CHE
NZL
9
9.5
log gdp per worker 1960
10
10.5
Figure 1.15. Annual growth rate of GDP per worker between 1960
and 2000 versus log GDP per worker in 1960 for core OECD countries.
This is what the vector Xt−1 captures in equation (1.1). In particular, when this
vector includes human capital-related variables such as years of schooling or life expectancy, Barro and Sala-i-Martin estimate β to be approximately -0.02, indicating
that the income gap between countries that have the same human capital endowment has been narrowing over the postwar period on average at about 2 percent a
year.
22
Figure 4.1 Relationship Between
Income per Capita and Population
Growth
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-9
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-10
Figure 5.4 Income per Capita
versus Total Fertility Rate
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-11
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-12
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-13
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-14
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-15
Figure 5.6a Changes in the Age
Structure of the Population, 1950–
2050
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-16
Figure 5.6b Changes in the Age
Structure of the Population, 1950–
2050
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-17
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-18
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-19
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-20
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-21
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-22
Figure 11.1 Growth of World
Trade, 1870–2005
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-23
Figure 11.2 Relationship Between
Economic Openness and GDP per
Capita
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-24
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-25
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-26
Figure 1 – Artificial versus Organic boundaries – Sudan and France
France
Fractal dimension of political
boundary = 1.0429
Figure 1a – France, with political boundaries highlighted at left
Sudan
Fractal
dimension of
political
boundary =
1.0245
Figure 1b – Sudan, with political boundaries highlighted at left
23
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-27
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-28
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-29
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-30
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
1-31