Changes in the world distribution of output-per-worker 1960-98: how a standard decomposition tells an unorthodox story

Changes in the world distribution of output-per-worker 1960-98: how a standard decomposition tells an unorthodox story
Document type
Working Paper
Author(s)
Beaudry, Paul; Collard, Fabrice; Green, David
Publisher
Institute for Fiscal Studies
Date of publication
4 September 2003
Series
The Institute for Fiscal Studies Working Papers
Subject(s)
Trends: economic, social and technology trends affecting business, Business & management history: including the development of management thought
Collection
Business and management
Material type
Reports

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This paper provides a decomposition of the change in the distribution of output–per–worker across countries over the period 1960–98 to explain why some countries have done so much better than others over the recent past. 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 a very substantial and previously unrecognized change in the parameters driving the growth process. In particular, we show that the role of capital deepening forces - that is the role of investment rates and population growth in affecting output - increased dramatically over the period 1978-98 versus 1960-78, and that this increase can account for almost all the observed changes in the world distribution In contrast, we do not find any significant effects coming through non–linear convergence mechanisms or increased importance of education; both of which have played prominent roles in recent discussion of economic performance. The results therefore highlight that the period 1978-98 was particularly advantageous to countries which strongly favored capital accumulation, and hence suggests that research aimed at understanding recent differences in economic performances across countries needs to focus on explaining why the social returns to physical capital accumulation where abnormally high over the period 1978-98.

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