The growing gap between rich and poor countries: A proposed explanation

Making use of data in the Penn World Table (Mark 5), this study seeks to explain the widely reported pattern of increasing divergence of per capita income levels between high and low-income countries and among low-income countries. Tests based on one-on-one comparisons of real growth in 1960-88 with starting levels of income per capita imply that increasing divergence of per capita income levels was largely due to differences between population growth and labor force growth that varied with income level. Further evidence is provided in the form of crosscountry growth regressions in which, with population growth divided into labor force growth and the amount by which population growth exceeds labor force growth, only the part of population growth that represents changes in the dependency ratio is closely linked to long-term growth. Copyright (C) 1996 Elsevier Science Ltd