Good Policy or Good Luck? Country Growth Performance and Temporary Shocks

39 Pages Posted: 20 May 2004

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Michael Kremer

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development; Harvard University - Harvard Kennedy School (HKS)

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS); Center for Global Development

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: September 1993

Abstract

Much of the new growth literature stresses country characteristics, such as education levels or political stability, as the dominant determinant of growth. However, growth rates are highly unstable over time, with a correlation across decades of .1 to .3, while country characteristics are stable, with cross-decade correlations of .6 to .9. Shocks, especially those to terms of trade, play a large role in explaining variance in growth. These findings suggest either that shocks are important relative to country characteristics in determining long-run growth, or that worldwide technological change determines long-run growth while country characteristics determine relative income levels.

Suggested Citation

Easterly, William and Kremer, Michael R. and Pritchett, Lant and Summers, Lawrence H., Good Policy or Good Luck? Country Growth Performance and Temporary Shocks (September 1993). NBER Working Paper No. w4474. Available at SSRN: https://ssrn.com/abstract=260539

William Easterly (Contact Author)

New York University - Department of Economics ( email )

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Michael R. Kremer

Harvard University - Department of Economics ( email )

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Brookings Institution

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National Bureau of Economic Research (NBER) ( email )

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Center for Global Development

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Harvard University - Harvard Kennedy School (HKS) ( email )

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Lant Pritchett

Harvard University - Harvard Kennedy School (HKS) ( email )

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HOME PAGE: http://ksghome.harvard.edu/~lpritch/

Center for Global Development

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Lawrence H. Summers

Harvard University ( email )

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617-495-1502 (Phone)
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National Bureau of Economic Research (NBER)

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Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
United States

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