Previous research suggests that economy-wide poverty traps are rarely observed in the data. In this paper, we explore a related hypothesis: low-income countries rarely improve their position relative to the US. Using finite state Markov chains, we show that upwards mobility is indeed limited. Since capital-output ratios are similar across countries, and human capital is also converging, the persistence of low relative income seems to originate in the persistence of low relative TFP. We study the dynamics of relative TFP and how they interact with absolute levels of human capital, casting new light on the future of convergence.
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- DOI
- https://doi.org/10.5089/9798400293276.001
- ISBN
- 9798400293276
- ISSN
- 1018-5941
- Issue
- 229
- Pages
- 34
- Published in
- United States of America
- Series
- Working Paper No. 2024/229
- StockNumber
- WPIEA2024229
- Volume
- 2024
Table of Contents
- Executive Summary 5
- I. Introduction 6
- II. Background 7
- III. Methods 10
- IV. The Data 12
- V. Results 13
- Table 1: Five-year transitions, Maddison data, 1950-1995 14
- Table 2: Five year transitions, Maddison data, 1995-2020 15
- VI. Relative TFP 15
- Table 3: Five-year transitions, TFP from PWT, 1974-1999 17
- Table 4: Five-year transitions, TFP from PWT, 1999-2019 18
- VII. Human capital and TFP 18
- Table 5: Five-year transitions, TFP and HC, 1974-2019 20
- VIII. Institutions 21
- Table 6: Five-year transitions, state capacity, 1974-2019 22
- Table 7: Five-year transitions, horizontal accountability, 1974-2019 23
- IX. Conclusions 24
- Annex I. 26
- I.I Quantiles and mobility 26
- 1.2 Unique stationary distributions 26
- 1.3 The Markov property 26
- 1.4 Constant growth thresholds 27
- 1.5 Bootstrap 27
- Country samples 27
- References 29
