Working Paper: NBER ID: w9240
Authors: Paul Beaudry; Fabrice Collard; David A. Green
Abstract: This papers examines changes in the distribution of per-worker-output across countries over the period 1960-98, with a particular focus on identifying the forces behind the hollowing out of the middle of the distribution and the associated emergence of a twin-peaks phenomenon. The main finding of the paper is that most of the change in shape of the world distribution of income between 1960-1998 can be accounted for by changes in the parameters driving the growth process. In particular, we show that role of physical capital investment and population growth in affecting output growth has increased substantially over the period and that this increase can account for all the hollowing-out of the distribution. In contrast, we do not find that changes in the distribution of variables played much of a role, nor do we find any significant effects coming through non-linear convergence mechanisms or increased importance of education. Our results suggest that research aimed at understanding changes in the world distribution of income should focus on explaining why the social returns to physical capital accumulation where so high over the period 1978-98. The paper ends by discussing elements that help understand this phenomena.
Keywords: output per worker; twin peaks; income distribution; economic growth
JEL Codes: O33; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased importance of physical capital investment (E22) | changes in the shape of the distribution of output per worker (D39) |
| increased importance of population growth (J11) | changes in the shape of the distribution of output per worker (D39) |
| changes in the distribution of investment rates (F21) | changes in the shape of the distribution of output per worker (D39) |
| changes in the distribution of population growth rates (J11) | changes in the shape of the distribution of output per worker (D39) |
| changes in the distribution of school enrollment rates (I24) | changes in the shape of the distribution of output per worker (D39) |
| changes in the distribution of residual factors (D39) | changes in the shape of the distribution of output per worker (D39) |
| nonlinear convergence mechanisms (C62) | changes in the shape of the distribution of output per worker (D39) |
| increased importance of education (I24) | changes in the shape of the distribution of output per worker (D39) |