Accounting for Cross-Country Income Differences : Ten Years Later
The study focused on a cross-section of countries observed in the mid-1990s, so the conclusions from that e¤ort are beginning to be a bit dated. In addition, signi cant revisions of the data underlying the 2005 paper have been published. Last but n...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/199521487336202705/Accounting-for-cross-country-income-differences-ten-years-later http://hdl.handle.net/10986/26105 |
| Summary: | The study focused on a cross-section of
countries observed in the mid-1990s, so the conclusions from
that e¤ort are beginning to be a bit dated. In addition,
signi cant revisions of the data underlying the 2005 paper
have been published. Last but not least, in the intervening
years become aware of ways in which the original
methodology can be usefully improved and extended. Hence the
present update and upgrade of the original paper. This paper
focuses on data (mostly) from 2005 and improves on the
original methodology in several dimensions. Development
accounting compares di¤erences in income per worker between
developing and developed countries to counter-factual
di¤erences attributable to observable components of physical
and human capital. Such calculations can serve a useful
preliminary diagnostic role before engaging in deeper and
more detailed explorations of the fundamental determinants
of di¤erences in income per worker. The research and policy
agenda would then have to focus on technology, allocative e¢
ciency, competition, and other determinants of the efficient
use of capital. However because of limitations in
thecoverage of the test results, author also present results
where human capital is only measured from years of schooling
and health. It turns out that, at least in my preferred
calibration, the addition or omission of cognitive skills
(as measured by test scores) does not greatly affect the
quantitative results. |
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