In neoclassical growth models with diminishing returns to capital, a
country's per capita growth rate tends to be inversely related to its initial
level of income per person. This convergence hypothesis seems to be
inconsistent with the cross-country evidence, which indicates that per capita
growth rates for about 100 countries in the post-World War II period are
uncorrelated with the starting level of per capita product. However, if one
holds constant measures of initial human capital-measured by primary and
secondary school-enrollment rates - there is evidence that countries with
lower per capita product tend to grow faster. Countries with higher human
capital also have lower fertility rates and higher ratios of physical
investment to GDP. These results on growth, fertility, and investment are
consistent with some recent theories of endogenous economic growth. With
regard to government, the cross-country data indicate that government
consumption is inversely related to growth, whereas public investment has
little relation with growth. Average growth rates are positively related to
political stability, which may capture the benefits of secure property
rights. There is also some indication that distortions of investment-goods
prices are adverse for growth. Finally, the analysis leaves unexplained a
good deal of the relatively weak growth performances of countries in
sub- Saharan Africa and Latin America.
*Published:
The Quarterly Journal of Economics, Vol. CVI, No. 425, pp. 407-443, (May 19 91).
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