The Evolution of International Output Differences (1960-2000): From Factors to Productivity

Abstract

This article presents a group of exercises of level and growth decomposition of output per worker using cross-country data from 1960 to 2000. It is shown that at least until 1975 factors of production (capital and education) were the main source of output dispersion across economies and that productivity variance was considerably smaller than in later years. Only after this date did the prominence of productivity start to show up in the data, as the majority of the literature has found. The growth decomposition exercises showed that the reversal of relative importance of productivity vis-a-vis factors is explained by the very good (bad) performance of productivity of fast- (slow-) growing economies. Although growth in the period, is on average, is mostly due to factor accumulation, its variance is explained by productivity.Cross-Country Income Inequality, Development, Total Factor Productivity, Aggregate Production Function, Growth Decomposition