Working Paper: NBER ID: w10828
Authors: Francesco Caselli
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.
Keywords: No keywords provided
JEL Codes: E2; O1; O2; O3; O4; O5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| differences in efficiency (D61) | differences in per capita income (F40) |
| efficiency differences (D61) | output differences (E23) |
| sectorial differences in total factor productivity (O49) | efficiency differences (D61) |
| poor countries use physical capital efficiently (O57) | efficiency differences (D61) |
| rich countries utilize human capital effectively (J24) | efficiency differences (D61) |