S-Shaped Transition and Catapult Effects

Abstract

Among today's rich economies, per capita output levels had diverged before converging to the levels of the frontier economy. Many non-rich countries also appear to follow this pattern of growth. Since frontier economies have grown at stable rates, non-frontier economies display an S-shape transition path. Along this transition, there are catapult effects: longer episodes of divergence are associated with faster subsequent rates of convergence to the frontier. We construct and quantitatively assess a model of S-shaped transition with catapult effects. Deviations in per capita output from frontier levels are endogenous, while conventional growth accounting would classify these as TFP differences.

Note: A previous version of this paper can be found at: http://ssrn.com/abstract=916784

Keywords: S-shaped transition, catapult effects, TFP

JEL Classification: O11, O41, O57