Accounting for cross-country income differences

Francesco Caselli

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Why are some countries so much richer than others? Development Accounting is a first-pass attempt at organizing the answer around two proximate determinants: factors of production and efficiency. It answers the question “how much of the cross-country income variance can be attributed to differences in (physical and human) capital, and how much to differences in the efficiency with which capital is used?” Hence, it does for the cross-section what growth accounting does in the time series. The current consensus is that efficiency is at least as important as capital in explaining income differences. I survey the data and the basic methods that lead to this consensus, and explore several extensions. I argue that some of these extensions may lead to a reconsideration of the evidence.

Keywords: income variance; capital; development accounting (search for similar items in EconPapers)
JEL-codes: D31 M00 M41 O15 O19 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2005-01
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Citations: View citations in EconPapers (840)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:5266

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