US Real GDP per capita in long run - iSites
U.S. Real GDP per capita in long run 1869: $2310 (2000 $US) 2005: $37,600
(US #2 out of 151 countries covered by PPP-adjusted Summers-Heston Penn-World Table 6.1 data— Luxembourg #1 at $45,900)
Figures have long-term per capita GDP and consumer expenditure in selected countries.
11
10
9
8
7
6 70 80 90 00 10 20 30 40 50 60 70 80 90 00 U.S. GDP U.S. Consumer expenditure
Real Per Capita GDP and Consumer Expenditure in U.S.
2
10.0 9.5 9.0 8.5 8.0 7.5 7.0 70 80 90 00 10 20 30 40 50 60 70 80 90 00 U.K. GDP U.K Consumer expenditure
Real Per Capita GDP and Consumer Expenditure in U.K.
3
10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 70 80 90 00 10 20 30 40 50 60 70 80 90 00 France GDP France Consumer expenditure
Real Per Capita GDP and Consumer Expenditure in France
4
10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 80 90 00 10 20 30 40 50 60 70 80 90 00 GDP Spain
C Spain
Real Per Capita GDP and Consumer Expenditure in Spain
5
8.0
7.6
7.2
6.8
6.4
6.0 80 90 00 10 20 30 40 50 60 70 80 90 00 GDP India
C India
Real Per Capita GDP and Consumer Expenditure in India
6
10
9
8
7
6
5 80 90 00 10 20 30 40 50 60 70 80 90 00 GDP Taiwan
C Taiwan
Real Per Capita GDP and Consumer Expenditure in Taiwan
7
Long-Term Economic Growth in OECD Countries Period
Growth rate of real GDP per person (percent per year)
Number of countries
1820-1840 1840-1860 1860-1880 1880-1900 1900-1920 1920-1940 1940-1960 1960-1980 1980-2000
1.2 2.1 1.3 1.4 0.8 1.8 2.4 3.1 1.8
10 10 14 17 17 17 17 17 17
Note: Data from Angus Maddison (2003). The 17 countries included are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, New Zealand, Norway, Sweden, Switzerland, United Kingdom, and United States. The growth rates are unweighted averages for the countries with available data. Fewer countries have data for the earlier periods. Maddison, Angus, The World Economy: Historical Statistics, OECD, 2003.
8
.20 WWII
.15 Korean War
.10 WWI
.05 .00
1888
-.05
1970 2001 1974-75 1949 1991 1958 1893-94 1954 1914 1982 1920-21 1937-38 1907-08
-.10 1930-33
-.15 1880
1900
1920
aftermath of WWII
1940
1960
1980
2000
Growth Rate of U.S. Real GDP, 1870-2005 The graph shows the annual growth rate of real GDP (real GNP before 1929). Aside from the years of major war, the years marked are recession periods. These periods have low (typically negative) rates of economic growth.
9
Over 136 years, U.S. per capita GDP rose by factor of 16—average growth rate was 2.0% per year. (Can use “rule of 69,” because log(2)=0.69, to compute # of years for per capita GDP to double— divide growth rate, γ, in % per year by 69—e.g. if γ=2% per year, 35 = 69/2 is # of years for per capita GDP to double. Over 136 years, per capita GDP doubles about 4 times—to get factor of 16.)
If U.S. growth rate lower by 1% per year—to 1.0% per year—per capita GDP in 2005 would have been $9000, 24% of actual. If higher by 1% year—to 3.0% per year—get $136,600, 3.6 times the actual.
10
GDP Across 100+ Countries, 1960-2000
In 2000, real per capita GDP (Summers-Heston 6.1; SH 6.2 out to 2004 is now available) ranged for 151 countries from $238 for Congo (Kinshasa) to $45,900 for Luxembourg—factor of 193. (Expressed as 2000 U.S. dollars.) See Figure. Congo has to double 7-8 times to catch up. If Congo grows at 2% per year (per capita, relative to Luxembourg), takes over 200 years. (Relative to U.S., factor for Congo is only 146.) In 1960, for 113 countries, range was from $400 for Tanzania to $15,600 for Switzerland. (U.S. was second again, at $12,800.) Factor of 39 between 11
Switzerland and Tanzania. See Figure. This range grew over time, as did other measures of dispersion (unweighted). “Shape” of distribution does not seem to have changed from 1960 to 2000.
Growth rates 1960-2000 for 111 countries averaged 1.8% per year. See Figure. Range is from -3.6% per year for Congo (Kinshasa) to 6.4% per year for Taiwan.
Most slow growers were in Sub-Saharan Africa (plus Nicaragua, Venezuela, Bolivia, though Iraq is probably the “champion” since 1980).
12
Fast growers dominated by East Asia: Singapore at 6.2, South Korea at 5.9. Botswana was 5.1, China 4.3, Ireland 4.1. U.S. was 2.5, #40.
For main regions: SSA started relatively poor and grew at lowest rate, ended up poorest by far. Asia started slightly above SSA in many cases, but grew rapidly and ended up mostly in middle. L.A. started middle to high, grew below average, ended up in middle along with Asia. OECD started highest and grew in middle range, ended up still highest.
13
20 Brazil, South Africa Thailand, Turkey
number of countries
16
Chile, Mexico Poland, Russia
China Egypt Ukraine
12
Uganda Zambia
Gambia Kenya
Czech Greece S. Korea
Pakistan Vietnam Israel, New Zealand Spain, Taiwan
Burundi Ethiopia
8
Australia, Canada France, Germany Hong Kong, Italy Japan, U.K.
Bulgaria Colombia Iran
Tanzania
Singapore U.S.
Bangladesh Ghana
4 Congo (Kinshasa) Nigeria Yemen
0 400
Bolivia India
1100
Indonesia Philippines
3000
Argentina Hungary
8100
Luxembourg
22000
r e al per capita GDP in 20 0 0
World Distribution of Real GDP per Person in 2000 The graph shows the distribution of real gross domestic product (GDP) per person for 151 countries in 2000. The horizontal axis is in 2000 U.S. dollars and uses a proportionate scale. Representative countries are indicated for the ranges of real GDP per person.
14
16
Brazil, Colombia Iran, Turkey
Bangladesh, Haiti Thailand, Zambia
number of countries
12
Costa Rica Hong Kong Portugal
Malaysia Singapore
Ghana, India Indonesia, Nigeria
Australia Canada Sweden U.S.
Chile, Greece Mexico, Spain
China Kenya
8
France U.K. Venezuela W. Germany
Argentina Italy
Congo (Brazz.) Malawi
4
Egypt, Ivory Coast S. Korea, Taiwan
Tanzania Ethiopia Pakistan
Switzerland Ireland, Israel South Africa
0 40 0
1100
3000
8 10 0
re a l per capita GDP in 196 0
World Distribution of Real GDP per Person in 1960 .
15
20
Australia, Chile, Iran Sweden, Turkey, U.K., U.S.
Argentina, Bangladesh New Zealand, Philippines South Africa, Switzerland
number of countries
16
Brazil, Egypt, France India, Israel, Italy, Pakistan
12 Senegal Venezuela
Bolivia Ethiopia Ivory Coast
Greece, Spain Indonesia
Malaysia, Mauritius Portugal, Romania
8 Angola Niger
Mozambique Nicaragua
Haiti Peru Tanzania
4 Congo (Kinshasa)
0 -0.04
China, Japan Ireland Botswana, Hong Kong
Nigeria Zambia
-0.02
Colombia Mexico
0.00
0.02
Cyprus Thailand
0.04
Singapore S. Korea, Taiwan
0.06
gro wth ra te o f GDP per person, 1960 -2000
World Distribution of Growth Rates of Real GDP per Person, 1960-2000
The unweighted average growth rate was 1.8% per year.
16
Catch up of China to US? In 2000, China roughly at $3900 (2000 US$), US at about $34,800, factor of a little more than 8. Catch up by 2020—i.e. in 20 years? Make up factor of 8 is like doubling 3 times, i.e. double in 7 years. Requires growth rate of (69/7) ≈ 10% per year. See Table.
Economic Growth and China’s real GDP per person in 2020 Growth rate of real GDP per person 2000-2020 2% per year 5% per year 10% per year
Real GDP per person in 2020 5820 10600 28800
17
Idea of conditional convergence. Lower real gdp per person (y) implies faster per capita growth rate, conditional on factors (individual characteristics, policies, institutions) that determine long-run position, y*:
Dy/y = F(y, y*) (-) (+) y* includes things like saving rate, population growth rate, quality of governance (e.g. rule of law), regulatory policies, international openness, macroeconomic policy, nature of educational and health institutions, etc. Are these exogenous?
18
See Figures on convergence relationships across countries and U.S. states.
19
growth rate, 1960-2000
.08 .06 .04 .02 .00 -.02 -.04 150
400
1100
3000
8100
22000
real GDP per person in 1960
Growth Rate versus Level of Real GDP per Person for a Broad Group of Countries The horizontal axis shows real GDP per person in 1960 in 2000 U.S. dollars on a proportionate scale for 112 countries. The vertical axis shows the growth rate of real GDP per person for each country from 1960 to 2000. The red line is the straight line that provides a best fit to the relation between the growth rate of real GDP per person (the variable on the vertical axis) and the level of real GDP per person (on the horizontal axis). Although this line slopes upward, the slope is—in a statistical sense—negligibly different from zero. Hence, the growth rate is virtually unrelated to the level of real GDP per person. Thus, this broad group of countries does not display convergence.
20
growth rate, 1960-2000
.045 .040
IRE
POR
.035
SPA LUX
.030
GRE
.025 .020
AUS NOR ITA BEL ICE FRA CAN US NLD DEN UK SW E
.015
SW Z
.010 3000
4450
6600
9900
14800
22000
real GDP per person in 1960
Growth Rate versus Level of Real GDP per Person for OECD Countries The horizontal axis shows real GDP per person in 1960 in 2000 U.S. dollars on a proportionate scale for 18 of the 20 founding members of the OECD (excluding Germany and Turkey).
21
Growth Rate of Personal Income Per Person, 1880-2000
NC
.025
SC
FL VA GA TN
AR
.02
MS
IA
TX
AL
MI
WV KS KY NM UT ME IN LA
.015
MO
MD MN NH VT OH NJCT IL SD DE PA WA MA ND NY OR RI
WI
ID WY
NE
.01
CO CA
AZ NV MT
.005 500
2500
1000
5000
Personal Income Per Person in 1880
Growth Rate versus Level of Income per Person for U.S. States, 1880-2000 The horizontal axis shows real personal income per person in 1982-84 U.S. dollars on a proportionate scale for 47 U.S. states. The two-letter abbreviation identifies the state. (Alaska, the District of Columbia, Hawaii, and Oklahoma are excluded.) The vertical axis shows the growth rate of real personal income per person for each state from 1880 to 2000. The solid line is the straight line that provides a best fit to the relation between the growth rate of income per person (the variable on the vertical axis) and the level of income per person (on the horizontal axis). The line has a clear negative slope—therefore, a lower level of income per person in 1880 matches up with a higher growth rate of income per person from 1880 to 2000. Thus, the U.S. states exhibit convergence.
22
.08 .06
growth rate
.04 .02 .00 -.02 -.04 -.06 -.08 400
1100
3000
8100
22000
60000
real GDP per person Growth Rate versus Level of Real GDP per Person: Conditional Convergence for a Broad Group of Countries The horizontal axis shows real GDP per person in 2000 U.S. dollars on a proportionate scale. The data are for 71 countries in 1965, 85 countries in 1975, and 82 countries in 1985. (The sample was based on the availability of data—86 countries appear at least once.) The vertical axis shows the corresponding growth rates of real GDP per person—for 1965-75, 1975-85, and 1985-95. Each of the growth rates filters out (and, therefore, holds constant) the estimated effects of the variables discussed in the text. The red line is the straight line that provides a best fit to the relation between the growth rate of real GDP per person (the variable on the vertical axis) and the level of real GDP per person (on the horizontal axis). The line has a clear negative slope. Therefore, once we hold constant the other variables, a lower level of real GDP per person matches up with a higher growth rate of real GDP per person. This relation is called conditional convergence.
23
Pattern in world income distribution from Sala-iMartin. First panel is for 1970 and second for 2000. These graphs come from Xavier Sala-i-Martin (2006). In each case, the horizontal axis plots real income in 1985 U.S. dollars on a proportionate scale. For the upper curves in the two figures, the vertical axis shows the number of people in the world who had each level of income. The vertical lines marked $1 show the annual real incomes that correspond to the standard poverty line of $1 per day ($570 per year in 1996 prices). The income distributions for a few large countries are shown separately. FSU is the former Soviet Union. (Nigeria is hidden beneath the Asian countries in the first panel.) The values shown on the upper curves for numbers of people in the world are the vertical sums of the numbers of people in all of the individual countries. However, only a few of the countries can be discerned in these graphs.
24
200,000
$1/day World
thousands of people
160,000
120,000
China 80,000 India 40,000
USSR Japan
0 $100
$1,000
USA
$10,000
Individual Countries
$100,000
World
World Income Distribution 1970 280,000
$1/day
World
240,000
thousands of people
200,000
160,000
120,000 India 80,000 China 40,000
0 $100
Nigeria
FSU
$1,000
Japan
$10,000
Individual Countries
World
World Income Distribution 2000 25
USA
$100,000
(US #2 out of 151 countries covered by PPP-adjusted Summers-Heston Penn-World Table 6.1 data— Luxembourg #1 at $45,900)
Figures have long-term per capita GDP and consumer expenditure in selected countries.
11
10
9
8
7
6 70 80 90 00 10 20 30 40 50 60 70 80 90 00 U.S. GDP U.S. Consumer expenditure
Real Per Capita GDP and Consumer Expenditure in U.S.
2
10.0 9.5 9.0 8.5 8.0 7.5 7.0 70 80 90 00 10 20 30 40 50 60 70 80 90 00 U.K. GDP U.K Consumer expenditure
Real Per Capita GDP and Consumer Expenditure in U.K.
3
10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 70 80 90 00 10 20 30 40 50 60 70 80 90 00 France GDP France Consumer expenditure
Real Per Capita GDP and Consumer Expenditure in France
4
10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 80 90 00 10 20 30 40 50 60 70 80 90 00 GDP Spain
C Spain
Real Per Capita GDP and Consumer Expenditure in Spain
5
8.0
7.6
7.2
6.8
6.4
6.0 80 90 00 10 20 30 40 50 60 70 80 90 00 GDP India
C India
Real Per Capita GDP and Consumer Expenditure in India
6
10
9
8
7
6
5 80 90 00 10 20 30 40 50 60 70 80 90 00 GDP Taiwan
C Taiwan
Real Per Capita GDP and Consumer Expenditure in Taiwan
7
Long-Term Economic Growth in OECD Countries Period
Growth rate of real GDP per person (percent per year)
Number of countries
1820-1840 1840-1860 1860-1880 1880-1900 1900-1920 1920-1940 1940-1960 1960-1980 1980-2000
1.2 2.1 1.3 1.4 0.8 1.8 2.4 3.1 1.8
10 10 14 17 17 17 17 17 17
Note: Data from Angus Maddison (2003). The 17 countries included are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, New Zealand, Norway, Sweden, Switzerland, United Kingdom, and United States. The growth rates are unweighted averages for the countries with available data. Fewer countries have data for the earlier periods. Maddison, Angus, The World Economy: Historical Statistics, OECD, 2003.
8
.20 WWII
.15 Korean War
.10 WWI
.05 .00
1888
-.05
1970 2001 1974-75 1949 1991 1958 1893-94 1954 1914 1982 1920-21 1937-38 1907-08
-.10 1930-33
-.15 1880
1900
1920
aftermath of WWII
1940
1960
1980
2000
Growth Rate of U.S. Real GDP, 1870-2005 The graph shows the annual growth rate of real GDP (real GNP before 1929). Aside from the years of major war, the years marked are recession periods. These periods have low (typically negative) rates of economic growth.
9
Over 136 years, U.S. per capita GDP rose by factor of 16—average growth rate was 2.0% per year. (Can use “rule of 69,” because log(2)=0.69, to compute # of years for per capita GDP to double— divide growth rate, γ, in % per year by 69—e.g. if γ=2% per year, 35 = 69/2 is # of years for per capita GDP to double. Over 136 years, per capita GDP doubles about 4 times—to get factor of 16.)
If U.S. growth rate lower by 1% per year—to 1.0% per year—per capita GDP in 2005 would have been $9000, 24% of actual. If higher by 1% year—to 3.0% per year—get $136,600, 3.6 times the actual.
10
GDP Across 100+ Countries, 1960-2000
In 2000, real per capita GDP (Summers-Heston 6.1; SH 6.2 out to 2004 is now available) ranged for 151 countries from $238 for Congo (Kinshasa) to $45,900 for Luxembourg—factor of 193. (Expressed as 2000 U.S. dollars.) See Figure. Congo has to double 7-8 times to catch up. If Congo grows at 2% per year (per capita, relative to Luxembourg), takes over 200 years. (Relative to U.S., factor for Congo is only 146.) In 1960, for 113 countries, range was from $400 for Tanzania to $15,600 for Switzerland. (U.S. was second again, at $12,800.) Factor of 39 between 11
Switzerland and Tanzania. See Figure. This range grew over time, as did other measures of dispersion (unweighted). “Shape” of distribution does not seem to have changed from 1960 to 2000.
Growth rates 1960-2000 for 111 countries averaged 1.8% per year. See Figure. Range is from -3.6% per year for Congo (Kinshasa) to 6.4% per year for Taiwan.
Most slow growers were in Sub-Saharan Africa (plus Nicaragua, Venezuela, Bolivia, though Iraq is probably the “champion” since 1980).
12
Fast growers dominated by East Asia: Singapore at 6.2, South Korea at 5.9. Botswana was 5.1, China 4.3, Ireland 4.1. U.S. was 2.5, #40.
For main regions: SSA started relatively poor and grew at lowest rate, ended up poorest by far. Asia started slightly above SSA in many cases, but grew rapidly and ended up mostly in middle. L.A. started middle to high, grew below average, ended up in middle along with Asia. OECD started highest and grew in middle range, ended up still highest.
13
20 Brazil, South Africa Thailand, Turkey
number of countries
16
Chile, Mexico Poland, Russia
China Egypt Ukraine
12
Uganda Zambia
Gambia Kenya
Czech Greece S. Korea
Pakistan Vietnam Israel, New Zealand Spain, Taiwan
Burundi Ethiopia
8
Australia, Canada France, Germany Hong Kong, Italy Japan, U.K.
Bulgaria Colombia Iran
Tanzania
Singapore U.S.
Bangladesh Ghana
4 Congo (Kinshasa) Nigeria Yemen
0 400
Bolivia India
1100
Indonesia Philippines
3000
Argentina Hungary
8100
Luxembourg
22000
r e al per capita GDP in 20 0 0
World Distribution of Real GDP per Person in 2000 The graph shows the distribution of real gross domestic product (GDP) per person for 151 countries in 2000. The horizontal axis is in 2000 U.S. dollars and uses a proportionate scale. Representative countries are indicated for the ranges of real GDP per person.
14
16
Brazil, Colombia Iran, Turkey
Bangladesh, Haiti Thailand, Zambia
number of countries
12
Costa Rica Hong Kong Portugal
Malaysia Singapore
Ghana, India Indonesia, Nigeria
Australia Canada Sweden U.S.
Chile, Greece Mexico, Spain
China Kenya
8
France U.K. Venezuela W. Germany
Argentina Italy
Congo (Brazz.) Malawi
4
Egypt, Ivory Coast S. Korea, Taiwan
Tanzania Ethiopia Pakistan
Switzerland Ireland, Israel South Africa
0 40 0
1100
3000
8 10 0
re a l per capita GDP in 196 0
World Distribution of Real GDP per Person in 1960 .
15
20
Australia, Chile, Iran Sweden, Turkey, U.K., U.S.
Argentina, Bangladesh New Zealand, Philippines South Africa, Switzerland
number of countries
16
Brazil, Egypt, France India, Israel, Italy, Pakistan
12 Senegal Venezuela
Bolivia Ethiopia Ivory Coast
Greece, Spain Indonesia
Malaysia, Mauritius Portugal, Romania
8 Angola Niger
Mozambique Nicaragua
Haiti Peru Tanzania
4 Congo (Kinshasa)
0 -0.04
China, Japan Ireland Botswana, Hong Kong
Nigeria Zambia
-0.02
Colombia Mexico
0.00
0.02
Cyprus Thailand
0.04
Singapore S. Korea, Taiwan
0.06
gro wth ra te o f GDP per person, 1960 -2000
World Distribution of Growth Rates of Real GDP per Person, 1960-2000
The unweighted average growth rate was 1.8% per year.
16
Catch up of China to US? In 2000, China roughly at $3900 (2000 US$), US at about $34,800, factor of a little more than 8. Catch up by 2020—i.e. in 20 years? Make up factor of 8 is like doubling 3 times, i.e. double in 7 years. Requires growth rate of (69/7) ≈ 10% per year. See Table.
Economic Growth and China’s real GDP per person in 2020 Growth rate of real GDP per person 2000-2020 2% per year 5% per year 10% per year
Real GDP per person in 2020 5820 10600 28800
17
Idea of conditional convergence. Lower real gdp per person (y) implies faster per capita growth rate, conditional on factors (individual characteristics, policies, institutions) that determine long-run position, y*:
Dy/y = F(y, y*) (-) (+) y* includes things like saving rate, population growth rate, quality of governance (e.g. rule of law), regulatory policies, international openness, macroeconomic policy, nature of educational and health institutions, etc. Are these exogenous?
18
See Figures on convergence relationships across countries and U.S. states.
19
growth rate, 1960-2000
.08 .06 .04 .02 .00 -.02 -.04 150
400
1100
3000
8100
22000
real GDP per person in 1960
Growth Rate versus Level of Real GDP per Person for a Broad Group of Countries The horizontal axis shows real GDP per person in 1960 in 2000 U.S. dollars on a proportionate scale for 112 countries. The vertical axis shows the growth rate of real GDP per person for each country from 1960 to 2000. The red line is the straight line that provides a best fit to the relation between the growth rate of real GDP per person (the variable on the vertical axis) and the level of real GDP per person (on the horizontal axis). Although this line slopes upward, the slope is—in a statistical sense—negligibly different from zero. Hence, the growth rate is virtually unrelated to the level of real GDP per person. Thus, this broad group of countries does not display convergence.
20
growth rate, 1960-2000
.045 .040
IRE
POR
.035
SPA LUX
.030
GRE
.025 .020
AUS NOR ITA BEL ICE FRA CAN US NLD DEN UK SW E
.015
SW Z
.010 3000
4450
6600
9900
14800
22000
real GDP per person in 1960
Growth Rate versus Level of Real GDP per Person for OECD Countries The horizontal axis shows real GDP per person in 1960 in 2000 U.S. dollars on a proportionate scale for 18 of the 20 founding members of the OECD (excluding Germany and Turkey).
21
Growth Rate of Personal Income Per Person, 1880-2000
NC
.025
SC
FL VA GA TN
AR
.02
MS
IA
TX
AL
MI
WV KS KY NM UT ME IN LA
.015
MO
MD MN NH VT OH NJCT IL SD DE PA WA MA ND NY OR RI
WI
ID WY
NE
.01
CO CA
AZ NV MT
.005 500
2500
1000
5000
Personal Income Per Person in 1880
Growth Rate versus Level of Income per Person for U.S. States, 1880-2000 The horizontal axis shows real personal income per person in 1982-84 U.S. dollars on a proportionate scale for 47 U.S. states. The two-letter abbreviation identifies the state. (Alaska, the District of Columbia, Hawaii, and Oklahoma are excluded.) The vertical axis shows the growth rate of real personal income per person for each state from 1880 to 2000. The solid line is the straight line that provides a best fit to the relation between the growth rate of income per person (the variable on the vertical axis) and the level of income per person (on the horizontal axis). The line has a clear negative slope—therefore, a lower level of income per person in 1880 matches up with a higher growth rate of income per person from 1880 to 2000. Thus, the U.S. states exhibit convergence.
22
.08 .06
growth rate
.04 .02 .00 -.02 -.04 -.06 -.08 400
1100
3000
8100
22000
60000
real GDP per person Growth Rate versus Level of Real GDP per Person: Conditional Convergence for a Broad Group of Countries The horizontal axis shows real GDP per person in 2000 U.S. dollars on a proportionate scale. The data are for 71 countries in 1965, 85 countries in 1975, and 82 countries in 1985. (The sample was based on the availability of data—86 countries appear at least once.) The vertical axis shows the corresponding growth rates of real GDP per person—for 1965-75, 1975-85, and 1985-95. Each of the growth rates filters out (and, therefore, holds constant) the estimated effects of the variables discussed in the text. The red line is the straight line that provides a best fit to the relation between the growth rate of real GDP per person (the variable on the vertical axis) and the level of real GDP per person (on the horizontal axis). The line has a clear negative slope. Therefore, once we hold constant the other variables, a lower level of real GDP per person matches up with a higher growth rate of real GDP per person. This relation is called conditional convergence.
23
Pattern in world income distribution from Sala-iMartin. First panel is for 1970 and second for 2000. These graphs come from Xavier Sala-i-Martin (2006). In each case, the horizontal axis plots real income in 1985 U.S. dollars on a proportionate scale. For the upper curves in the two figures, the vertical axis shows the number of people in the world who had each level of income. The vertical lines marked $1 show the annual real incomes that correspond to the standard poverty line of $1 per day ($570 per year in 1996 prices). The income distributions for a few large countries are shown separately. FSU is the former Soviet Union. (Nigeria is hidden beneath the Asian countries in the first panel.) The values shown on the upper curves for numbers of people in the world are the vertical sums of the numbers of people in all of the individual countries. However, only a few of the countries can be discerned in these graphs.
24
200,000
$1/day World
thousands of people
160,000
120,000
China 80,000 India 40,000
USSR Japan
0 $100
$1,000
USA
$10,000
Individual Countries
$100,000
World
World Income Distribution 1970 280,000
$1/day
World
240,000
thousands of people
200,000
160,000
120,000 India 80,000 China 40,000
0 $100
Nigeria
FSU
$1,000
Japan
$10,000
Individual Countries
World
World Income Distribution 2000 25
USA
$100,000
