Working Paper: NBER ID: w11528
Authors: Benjamin F. Jones; Benjamin A. Olken
Abstract: This paper investigates the remarkable extremes of growth experiences within countries and examines the changes that occur when growth starts and stops. We find three main results. First, all but the very richest countries experience both growth miracles and failures over substantial periods. Second, growth accounting reveals that physical capital accumulation plays a negligible role in growth take-offs and a larger but still modest role in growth collapses. The implied role of productivity in these shifts is also directly reflected in employment reallocations and changes in trade. Third, growth accelerations and collapses are asymmetric phenomena. Collapses typically feature reduced manufacturing and investment amidst increasing price instability, whereas growth takeoffs are primarily associated with large and steady expansions in international trade. This asymmetry suggests that the roads into and out of rapid growth expansions may not be the same. The results stand in contrast to much growth theory and conventional wisdom: despite much talk of poverty traps, even very poor countries regularly grow rapidly, and the role of aggregate investment in growth accelerations is negligible.
Keywords: Growth; Productivity; Investment; Economic Development
JEL Codes: O47; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic policies and conditions (E69) | growth rates (O40) |
| physical capital accumulation (E22) | growth takeoffs (O40) |
| physical capital accumulation (E22) | growth collapses (O40) |
| productivity shifts (O49) | growth transitions (O41) |
| sector reallocations (R38) | productivity changes (O49) |
| international trade expansions (F19) | growth accelerations (O41) |
| shifts in the manufacturing labor force (J21) | growth accelerations (O41) |
| growth collapses (O40) | investment reductions (G31) |
| growth collapses (O40) | price instability (E31) |
| growth takeoffs (O40) | steady trade expansions (F10) |