Accounting for Difference in Economic Growth

Barry Bosworth, S. M. Collins and Yu-chin Chen ()

No 115, Discussion Papers from Brookings Institution, International Economics

Abstract: This paper uses a combination of growth accounting and regression analysis to examine economic growth experiences of 88 developing and industrial economies over the period 1960-1992. The decomposition shows that increases in total factor productivity (TFP) have been surprisingly small in developing countries, and that accumulation of physical and human capital account for most of the growth per worker. This reinforces a finding of some previous authors, but for a much larger sample of countries. Further, the fact that countries with high rates of factor accumulation do not have unusually high rates of TFP growth provides little support for the new endogenous growth theories. Our analysis also uncovers significant difficulties with the use of investment rates and school enrollment rates as proxies for capital accumulation, highlighting a reason why some previous studies have understated the importance of accumulation. Our regression results strongly support the growing consensus that stable, orthodox macroeconomic policy, combined with outward oriented trade policies foster economic growth. We explore the channels through which determinants of growth operate. Among other findings, we show that larger budget deficits slow growth through reducing capital accumulation, while real exchange rate volatility operates mainly through slowing TFP growth. Outward orientation appears to work through both channels.

References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://apps89.brookings.edu/views/papers/bdp/BDP115/Bdp115.pdf text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to apps89.brookings.edu:80 (No such host is known. )

Related works:
Working Paper: Accounting for Differences in Economic Growth (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wop:briedp:115

Access Statistics for this paper

More papers in Discussion Papers from Brookings Institution, International Economics Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().