Losers and Winners in Economic Growth

Abstract

This paper examines the growth rates in 116 economies from 1965 to 1985. It finds that the lowest quintile had an average growth rate of real gross domestic product (GDP) per capita of -1.3 percent, whereas the highest quintile averaged 4.8 percent. The authors isolate five influences that discriminate reasonably well between slow and fast growers: a conditional convergence effect, whereby a country grows faster if it begins with lower real GDP per capita in relation to its initial level of human capital in the forms of educational attainment and health; a positive effect on growth from a high ratio of investment to GDP (although this effect is weaker than that reported in some previous studies); a negative effect from excessively large government; a negative effect from government-induced distortions of markets; and a negative effect from political instability. Overall, the fitted growth rates for eighty-five economies for 1965-85 had a correlation of 0.8 with the actual values. The authors also find that female educational attainment has a pronounced negative effect on fertility, whereas female and male attainment are each positively related to life expectancy and negatively related to infant mortality.