The Facts of Economic Growth Chad Jones Stanford GSB Prepared for the Handbook of Macroeconomics The Facts of Growth – p. 1
The Facts of Economic Growth
Chad Jones
Stanford GSB
Prepared for the Handbook of Macroeconomics
The Facts of Growth – p. 1
Outline
• Facts of Frontier Growth (e.g. U.S. or West)
◦ Basic facts
◦ Growth accounting and components
◦ Miscellaneous
• The Spread of Growth
◦ Basic facts
◦ Development accounting
◦ Why such large TFP differences?
The Facts of Growth – p. 2
GDP per person in the United States
1880 1900 1920 1940 1960 1980 2000
2,000
4,000
8,000
16,000
32,000
64,000
2.0% per year
YEAR
LOG SCALE, CHAINED 2009 DOLLARS
The Facts of Growth – p. 3
The Stability of U.S. Growth
Growth GrowthPeriod Rate Period Rate
1870–2007 2.03 1973–1995 1.82
1870–1929 1.76 1995–2007 2.13
1929–2007 2.23
1900–1950 2.06 1995–2001 2.55
1950–2007 2.16 2001–2007 1.72
1950–1973 2.50
1973–2007 1.93
The Facts of Growth – p. 4
Economic Growth over the Very Long Run
0 200 400 600 800 1000 1200 1400 1600 1800 2000
5
10
15
20
25
30
35
40
45
Population
Per capita GDP
YEAR
INDEX (1.0 IN INITIAL YEAR)
The Facts of Growth – p. 5
Growth Accounting for the United States
——— Contributions from ———Output Labor Labor-Aug.
Period per hour K/Y Composition TFP
1948–2013 2.5 0.1 0.3 2.0
1948–1973 3.3 -0.2 0.3 3.2
1973–1990 1.6 0.5 0.3 0.8
1990–1995 1.6 0.2 0.7 0.7
1995–2000 3.0 0.3 0.3 2.3
2000–2007 2.7 0.2 0.3 2.2
2007–2013 1.7 0.1 0.5 1.1
The Facts of Growth – p. 6
U.S. Investment in Physical Capital
Equipment
Structures
YEAR
1930 1940 1950 1960 1970 1980 1990 2000 2010
SHARE OF GDP
0%
5%
10%
15%
20%
25%
The Facts of Growth – p. 7
U.S. Capital and Labor Shares of Factor Payments
Labor share
Capital share
YEAR
1950 1960 1970 1980 1990 2000 2010
PERCENT
20
30
40
50
60
70
80
The Facts of Growth – p. 8
U.S. Educational Attainment
1880 1900 1920 1940 1960 1980 20007
8
9
10
11
12
13
14
15
Adult labor force
By birth cohort
YEAR
YEARS OF SCHOOLING
The Facts of Growth – p. 9
College Graduates and the College Wage Premium
1960 1970 1980 1990 2000 2010
0
20
40
60
Fraction of hours worked
by college-educated workers
(left scale)
College wage premium
(right scale)
PERCENTPERCENT
40
60
80
100
The Facts of Growth – p. 10
U.S. Research and Development Spending
Private R&D
Government R&D
Software and
Entertainment
YEAR
1930 1940 1950 1960 1970 1980 1990 2000 2010
SHARE OF GDP
0%
1%
2%
3%
4%
5%
6%
The Facts of Growth – p. 11
Share of Employment in R&D
1950 1960 1970 1980 1990 2000 20100%
0.1%
0.2%
0.3%
0.4%
United StatesOECD
OECD plus China
and Russia
YEAR
SHARE OF THE POPULATION
The Facts of Growth – p. 12
U.S. Patents
1900 1920 1940 1960 1980 20000
50
100
150
200
250
300
Total in 2013: 302,000
U.S. origin: 147,000
Foreign share: 51%
Total
U.S. origin
YEAR
THOUSANDS
The Facts of Growth – p. 13
Employment in Agriculture
1840 1860 1880 1900 1920 1940 1960 1980 20000
10
20
30
40
50
60
70
80
90
YEAR
PERCENT
United States
Japan
The Facts of Growth – p. 14
Health Spending as a Share of GDP
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20102
4
6
8
10
12
14
16
18
YEAR
PERCENT
U.S.
Germany
France
U.K.
Japan
The Facts of Growth – p. 15
Average Annual Hours Worked
1950 1960 1970 1980 1990 2000 20101400
1600
1800
2000
2200
2400
2600
2800
S. Korea
U.S.
Japan
France
U.K.
YEAR
AVERAGE ANNUAL HOURS WORKED
The Facts of Growth – p. 16
Top Income Inequality
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
2%
4%
6%
8%
10%
United States
France
YEAR
INCOME SHARE OF TOP 0.1 PERCENT
The Facts of Growth – p. 17
GDP per person, Top 0.1% and Bottom 99.9%
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
5
10
20
40
80
160
320
640
1280
2560
5120
Top 0.1%
Bottom 99.9%
0.72%
6.86%
2.30%
1.82%
YEAR
THOUSANDS OF 2009 CHAINED DOLLARS
The Facts of Growth – p. 18
The Real Price of Industrial Commodities
YEAR
1900 1920 1940 1960 1980 2000
EQUALLY-WEIGHTED PRICE INDEX (INITIAL VALUE IS 100)
0
20
40
60
80
100
120
140
The Facts of Growth – p. 19
The Great Divergence
1200 1300 1400 1500 1600 1700 1800 1900 2000
20
40
60
80
100 U.S.
U.K.
Japan
Argentina
China
Ghana
YEAR
GDP PER PERSON (MULTIPLE OF 300 DOLLARS)
The Facts of Growth – p. 20
The Spread of Economic Growth since 1980
United States
Japan
Western Europe
Brazil
Russia
China
India
Sub-Saharan Africa
YEAR
1980 1985 1990 1995 2000 2005 2010
GDP PER PERSON (US=100)
5
10
20
40
80
The Facts of Growth – p. 21
Convergence in the OECD
1/4 1/2 1 1.5%
2%
2.5%
3%
3.5%
4%
4.5%
Austria
Belgium
Canada
Switzerland
Germany
Denmark
Spain
Finland
France
United Kingdom
Greece
Ireland
Iceland
Italy
Japan
Luxembourg Netherlands
Norway
Portugal
Sweden
Turkey
United States
GDP PER PERSON (US=1) IN 1960
GROWTH RATE, 1960 - 2011
The Facts of Growth – p. 22
The Lack of Convergence Worldwide
1/64 1/32 1/16 1/8 1/4 1/2 1 -3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Argentina
Burundi
Burkina Faso
Brazil
Botswana
C. Afr. Republic
Chile
China
Cote dIvoire
DR Congo
Congo
Comoros
Cape Verde
Cyprus Egypt
Ethiopia Gabon
Guinea
Equatorial Guinea
Guatemala
Hong Kong
India
Iran
Israel
Jamaica
South Korea
Lesotho Morocco
Madagascar
Malta
Mozambique
Malawi
Malaysia
Namibia
Niger
Nigeria
Nepal New Zealand
Panama
Philippines
Paraguay
Romania Singapore
El Salvador
Thailand
Trinidad/Tobago
Tunisia
Taiwan
Venezuela
Canada
Switzerland
Germany Finland
France
UK
Ireland
Iceland
Italy
Japan
Luxembourg
Norway
Portugal
Turkey US
GDP PER PERSON (US=1) IN 1960
GROWTH RATE, 1960 - 2011
The Facts of Growth – p. 23
Divergence since 1960
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
1
1.1
1.2
1.3
1.4
1.5
Standard deviation of
log GDP per person
(left scale)
Ratio of GDP per person,
5th Richest to 5th Poorest
(right scale)
STANDARD DEVIATIONRATIO
30
40
50
60
70
80
The Facts of Growth – p. 24
The Very Long-Run Distribution
—— Distribution —— Years to
“Bin” 1960 2010 Long-Run “Shuffle”
Less than 5 percent 14 29 27 1470
Between 5 and 10 percent 21 12 9 1360
Between 10 and 20 percent 25 13 8 1040
Between 20 and 40 percent 18 16 8 1120
Between 40 and 80 percent 14 18 28 1450
More than 80 percent 7 12 20 1500
The Facts of Growth – p. 25
The Distribution of World Income by Population
1 2 4 8 16 32 64 128
20
40
60
80
100
2011
1960
India
China
DAILY INCOME PER PERSON
SHARE OF WORLD POPULATION (PERCENT)
The Facts of Growth – p. 26
Development Accounting
GDP per Human Share
worker, y (K/Y )α
1−α capital, h TFP to TFP
U.S. 1.000 1.000 1.000 1.000 ...
France 0.790 1.184 0.840 0.795 55.6%
U.K. 0.733 1.015 0.780 0.925 46.1%
Japan 0.683 1.218 0.903 0.620 63.9%
Argentina 0.376 1.109 0.779 0.435 66.5%
China 0.136 1.137 0.713 0.168 82.9%
India 0.096 0.827 0.533 0.217 67.0%
Malawi 0.021 1.107 0.507 0.038 93.6%
Average 0.194 0.978 0.694 0.286 64.3%
1/Average 5.146 1.022 1.440 3.496 70.4%
The Facts of Growth – p. 27
The Share of TFP in Development Accounting
1/128 1/64 1/32 1/16 1/8 1/4 1/2 1 2 0
10
20
30
40
50
60
70
80
90
100
Albania
Burundi
Belize
Brazil
Barbados
Brunei
China
Cote dIvoire
Cameroon
DR Congo
Egypt Spain
France
U.K.
Guatemala
Hungary
Indonesia
India
Ireland
Iraq Israel
Jordan
Japan South Korea
Kuwait
Lesotho
Macao
Maldives
Mexico
Mali
Mozambique
Mauritius
Malawi
Malaysia
Niger
Netherlands
Norway
New Zealand
Pakistan
Philippines
Qatar
Rwanda
Sudan
Senegal
Singapore
Sierra Leone
El Salvador
Slovenia
Syria
Togo
Thailand
Trinidad/Tobago
Turkey
Taiwan
Uganda
Ukraine Vietnam
Yemen
Zimbabwe
GDP PER WORKER, 2010 (US=1)
PERCENT
The Facts of Growth – p. 28
Korea at Night
The Facts of Growth – p. 29
The Reversal of Fortune
1/16 1/4 1 4 16 64 1/256
1/128
1/64
1/32
1/16
1/8
1/4
1/2
1
Argentina
Australia
Burundi
Bangladesh
Bahamas
Brazil
Barbados
Botswana
C. Afr. Republic
Canada
Congo
Ecuador Egypt
Ethiopia
Ghana
Guinea
Hong Kong
Honduras
Indonesia
India
Lao
Sri Lanka
Lesotho
Morocco
Mexico
Mali
Malawi
Malaysia
Namibia
Niger
Nigeria
Nepal
New Zealand
Pakistan
Panama
Peru
Philippines Paraguay
Rwanda
Sudan
Senegal
Singapore
El Salvador
Suriname
Swaziland
Chad
Tunisia
Tanzania Uganda
United States
St. Vincent
Venezuela
Vietnam
South Africa
Zambia
Zimbabwe
POPULATION DENSITY IN 1500 (PEOPLE PER SQUARE KM)
GDP PER PERSON (US=1) IN 2011
The Facts of Growth – p. 30
Taxes and Growth in the United States
1880 1900 1920 1940 1960 1980 2000
0
5
10
Total government revenues
as a share of GDP (right scale)
Annual growth of GDP per person
(moving average, +/-5 years, left scale)
GROWTH RATE (PERCENT)TAX SHARE (PERCENT)
10
20
30
The Facts of Growth – p. 31
Tax Revenues as a Share of GDP
1/128 1/64 1/32 1/16 1/8 1/4 1/2 1 2 0
10
20
30
40
50
60
70
Angola
Argentina
Australia
Azerbaijan
Belgium
Burkina Faso
Bangladesh
Bahrain
Bahamas
Bosnia/Herz.
Brazil
Botswana
Canada
Switzerland
Chile
China
DR Congo
Congo
Colombia
Cyprus
Germany
Ethiopia
Fiji
France
United Kingdom
Equatorial Guinea
Greece
Honduras
Croatia
Indonesia
India
Ireland
Japan
Kenya
South Korea
Kuwait
Lebanon Liberia
Lesotho
Luxembourg
Macao
Morocco Moldova
Madagascar
Mexico
Malta
Mozambique
Niger Nigeria
Norway
Qatar
Senegal Singapore
El Salvador
Serbia
Sweden
Syria
Togo
Ukraine
United States
S. Africa
GDP PER PERSON (US=1) IN 2011
PERCENT OF GDP
The Facts of Growth – p. 32
The Distribution of TFPR in 4-digit Manufacturing
U.S.
China
India
REVENUE TFP, TFPR
1/8 1/4 1/2 1 2 4 8
DENSITY
0
0.2
0.4
0.6
The Facts of Growth – p. 33
Average Employment over the Life Cycle
< 5 5-9 10-14 15-19 20-24 25-29 30-34 35+
1
2
4
6
8
10U.S.
Mexico
India
AGE
AVERAGE EMPLOYMENT (AGE<5 = 1, LOG SCALE)
The Facts of Growth – p. 34
Technology Adoption is Speeding Up Over Time
1800 1850 1900 1950 20000
20
40
60
80
100
120
140
Cars
PCs
Electricity
Trucks
Blast oxygen
Railways (freight)
Railways (passengers)
Telegrams
Telephones
Aviation (freight)
Aviation (passengers)
Cellphones
Internet users MRI units
Steam- and motorships
YEAR OF INVENTION
ADOPTION LAG (YEARS)
The Facts of Growth – p. 35
Conclusion: Missing facts?
• Trade and growth
◦ Something like Sachs-Warner — open economies growfaster for awhile?
• Spread of growth feeds the frontier
◦ PhD’s in science/engineering in China
• Other
◦ Hsieh-Moretti misallocation of population across space
◦ Karabarbounis-Neiman factor shares for other countries
The Facts of Growth – p. 36