An Investigation of Cross-Country Income Differences

19 Pages Posted: 22 Aug 2008

See all articles by Pedro C. Ferreira

Pedro C. Ferreira

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV)

João Victor Issler

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Samuel D. Pessoa

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV); University of Pennsylvania

Date Written: December 1, 2005

Abstract

This paper investigates the nature of income inequality across nations. Several exercises, such as variance decompositions, simulations and counter-factual analyses are performed. We find that, although total factor productivity has a leading role in explaining the dispersion of output per worker, countries grew in the past -and, consequently, are poor in the present- for different reasons. Even after correcting for productivity differences, some nations remain poor mostly because of low schooling of the labor force and other because they impose too many distortions to capital accumulation. Policy recommendations have to take country differences into account, or else they have a high chance of being either wrong or ineffective.

Keywords: Cross-Country Income inequality, Development, Total Factor Productivity, Aggregate Production Function

JEL Classification: O11, O47, O57

Suggested Citation

Cavalcanti Ferreira, Pedro and Issler, João Victor and Pessoa, Samuel D., An Investigation of Cross-Country Income Differences (December 1, 2005). Revista de Analisis Economico, Vol. 20, No. 2, 2005, Available at SSRN: https://ssrn.com/abstract=1244243

Pedro Cavalcanti Ferreira (Contact Author)

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV) ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55 21 559 5840 (Phone)
+55 21 553 8821 (Fax)

João Victor Issler

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55 21 2559-5833 (Phone)
+55 21 2553-8821 (Fax)

Samuel D. Pessoa

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV) ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55 21 559 5833 (Phone)
+55 21 552 4898 (Fax)

University of Pennsylvania ( email )

Department of Economics
Philadelphia, PA 19104-6370
United States

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