What Have We Learned from a Decade of Empirical Research on Growth? It's Not Factor Accumulation: Stylized Facts and Growth Models

Posted: 29 Feb 2008

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Date Written: August 2001

Abstract

The article documents five stylized facts of economic growth. (1) The "residual" (total factor productivity, tfp) rather than factor accumulation accounts for most of the income and growth differences across countries. (2) Income diverges over the long run. (3) Factor accumulation is persistent while growth is not, and the growth path of countries exhibits remarkable variation. (4) Economic activity is highly concentrated, with all factors of production flowing to the richest areas. (5) National policies are closely associated with long-run economic growth rates. These facts do not support models with diminishing returns, constant returns to scale, some fixed factor of production, or an emphasis on factor accumulation. However, empirical work does not yet decisively distinguish among the different theoretical conceptions of tfp growth. Economists should devote more effort toward modeling and quantifying tfp.

Suggested Citation

Easterly, William and Levine, Ross Eric, What Have We Learned from a Decade of Empirical Research on Growth? It's Not Factor Accumulation: Stylized Facts and Growth Models (August 2001). World Bank Economic Review, Vol. 15, Issue 2, pp. 177-219, 2001. Available at SSRN: https://ssrn.com/abstract=916798

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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