ITFD Growth and Development LECTURE SLIDES SET 0 Professor Antonio Ciccone ITFD Growth and Development SLIDE SET 0

Economic Growth: Important Facts (1) Long Run Growth in the World (2) Balanced Growth in the US? (3) Long Run Effect of Growth Differentials (4) World Income Distribution (Stability and Differences Rich/Poor) (5) Heterogeneity of Economic Growth and Changes in the World Income Distribution ITFD Growth and Development SLIDE SET 0

(1) Economic Growth in the Very Long Run ITFD Growth and Development SLIDE SET 0

(2) US (Balanced) Growth Since 1890 ITFD Growth and Development SLIDE SET 0

(3) Long Run Effects of Growth Differentials -The real per capita GDP in the United States has been growing at a rate of 1.8% per year since 1870. -This performance has given the US the second highest level of per capita GDP in the world (after Luxembourg, a country with a population of only about 400.000 inhabitants) ITFD Growth and Development SLIDE SET 0

Long Run Effects of Growth Differentials If, starting in 1870, the US had grown at a rate of 0,8% (similar to the one experienced over the same period in India (0,64) or Pakistan (0,88) ), now the US would have a per capita GDP 72% LOWER than the actual value. To put it another way, if the growth rate had been lower by just 1 percentage point per year, today’s US GDP per capita would have been close to that of Argentina or Romania. On the other hand, if, starting in 1870, the US had grown at a rate of 2,8% (close to the long run growth experienced by Japan(2,95% from 1890 to 1990) and Taiwan(2,75% from 1900 to 1987), now the US would have a per capita GDP 3,8 times higher than the actual value. ITFD Growth and Development SLIDE SET 0

Long Run Effects of Growth Differentials Argentina Romania ITFD Growth and Development SLIDE SET 0

Long Run Effects of Growth Differentials Japan GDP per capita in 1990 was about 20 times its level in 1890 US GDP per capita in 2000 was more than 10 times its level in 1870 ITFD Growth and Development SLIDE SET 0

(4) The World Income Distribution in 1960 and 1990/2000 Indicators of (the stability) of the World Income Distribution On the Differences between Rich and Poor ITFD Growth and Development SLIDE SET 0

ITFD Growth and Development SLIDE SET 0 Log GDP/person 2000 Log GDP/person 1960 ITFD Growth and Development SLIDE SET 0

ITFD Growth and Development SLIDE SET 0 Log GDP/person 2000 Log GDP/person 1960 ITFD Growth and Development SLIDE SET 0

ITFD Growth and Development SLIDE SET 0 The Difference between Rich (Productive) and Poor (Unproductive) Countries If Tanzania were to grow at the long term US rate of 1,8% per year, it would take 235 years to reach the 2000 US per capita GDP. The range of growth rates from 1960 to 2000 goes from -2% ((Democratic Republic of Congo) to 6.4% (Taiwan). Forty year differences in growth rates of this magnitude have enormous consequences for standards of living. ITFD Growth and Development SLIDE SET 0

ITFD Growth and Development SLIDE SET 0 Days the typical US citizen needs to produce the equivalent to other countries GDP per capita ITFD Growth and Development SLIDE SET 0

(5) Differences in Growth Performance Heterogeneity in economic growth rates Geographic growth patterns ITFD Growth and Development SLIDE SET 0

Growth rate of per capita GDP 1960-2000 ITFD Growth and Development SLIDE SET 0

ITFD Growth and Development SLIDE SET 0 As a rough generalization for regional growth experiences: -Sub-Saharan Africa started relatively poor in 1960 and grew at the lowest rate, so it ended by far the poorest area in 2000. -Asia started only slightly above Africa in many cases but grew rapidly and ended up mostly in the middle. -Latin America started in the mid to high range, grew somewhat below average, and therefore ended up mostly in the middle along with Asia. -OECD countries started highest in 1960, grew in a middle range or better, and therefore ended up still the richest. ITFD Growth and Development SLIDE SET 0

ITFD Growth and Development SLIDE SET 0