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Accounting for Cross-Country Income Differences

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Author Info
Francesco Caselli

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Abstract

Why are some countries so much richer than others? Development Accounting is a first-pass attempt at organizing the answer around two proximate determinants: factors of production and efficiency. It answers the question "how much of the cross-country income variance can be attributed to differences in (physical and human) capital, and how much to differences in the efficiency with which capital is used?" Hence, it does for the cross-section what growth accounting does in the time series. The current consensus is that efficiency is at least as important as capital in explaining income differences. I survey the data and the basic methods that lead to this consensus, and explore several extensions. I argue that some of these extensions may lead to a reconsideration of the evidence.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10828.

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Date of creation: Oct 2004
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Handle: RePEc:nbr:nberwo:10828

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Find related papers by JEL classification:
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O2 - Economic Development, Technological Change, and Growth - - Development Planning and Policy
O3 - Economic Development, Technological Change, and Growth - - Technological Change

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  49. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  57. Francesco Caselli & Wilbur John Coleman II, 2001. "The U.S. Structural Transformation and Regional Convergence: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 584-616, June. [Downloadable!] (restricted)
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