Lant Pritchett, "Divergence, Bigtime"

Abstract

There has been a great deal of attention in the economic growth literature recently on the phenomena of “conditional convergence,” the tendency of economies at lower levels of income to grow faster, conditional on their rate of factor accumulation. In this paper I document that, irrespective of conditional convergence, perhaps the basic fact of modern economic history is massive absolute divergence in the distribution of incomes across countries. Discussion of long-run convergence or divergence has been hindered by the fact that reliable estimates of per capita income do not, by and large, exist for the countries which are now poor. This paper shows that in order to draw reasonable inferences about whether or not incomes have converged or diverged we do not need historical estimates of per capita income. A plausible lower limit for historical per capita incomes combined with estimates of the current income of poor countries, places a binding constraint on historical growth rates. I estimate that between 1870 and 1985 the ratio of richest to poorest countries incomes has increased six fold, the standard deviations of (natural log) per capita incomes has increased by between 60 to 100 percent, and that the average real income gap between the richest and poorest countries grew almost ninefold, from $1,500 to over $12,000.

the article as a .pdf file


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