Macroeconomics
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Professor Antonio Ciccone
Macroeconomics
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SLIDE 1
Economic Growth:
Important Facts
(1) Long Run Growth in the World
(2) Balanced Growth in the US?
(3) Long Run Effect of Growth
Differentials
(4) World Income Distribution (Stability
and Differences Rich/Poor)
(5) Heterogeneity of Economic Growth
and Changes in the World Income
Distribution
Macroeconomics
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SLIDE 2
(1) Economic Growth in the Very Long
Run
Macroeconomics
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SLIDE 3
(2) US (Balanced) Growth Since 1890
Macroeconomics
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SLIDE 4
(3) Long Run Effects of Growth
Differentials
-The real per capita GDP in the United
States has been growing at a rate of 1.8%
per year since 1870.
-This performance has given the US the
second highest level of per capita GDP in
the world (after Luxembourg, a country with a
population of only about 400.000 inhabitants)
Macroeconomics
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SLIDE 5
Long Run Effects of Growth Differentials
• If, starting in 1870, the US had grown at a rate of 0,8%
(similar to the one experienced over the same period in India
(0,64) or Pakistan (0,88) ), now the US would have a per
capita GDP 72% LOWER than the actual value.
• To put it another way, if the growth rate had been lower by just
1 percentage point per year, today’s US GDP per capita would
have been close to that of Argentina or Romania.
• On the other hand, if, starting in 1870, the US had grown at a
rate of 2,8% (close to the long run growth experienced by
Japan(2,95% from 1890 to 1990) and Taiwan(2,75% from 1900
to 1987), now the US would have a per capita GDP 3,8 times
higher than the actual value.
Macroeconomics
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SLIDE 6
Long Run Effects of Growth Differentials
GDP/person (1996 US$)
140000
120000
100000
US
80000
US(0,8%)
60000
US (2,8%)
40000
20000
0
1850
Argentina
Romania
1900
1950
2000
2050
Year
Macroeconomics
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SLIDE 7
Long Run Effects of Growth Differentials
• Japan GDP per capita in 1990 was about
20 times its level in 1890
• US GDP per capita in 2000 was more
than 10 times its level in 1870
Macroeconomics
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SLIDE 8
(4) The World Income Distribution
in 1960 and 1990/2000
• Indicators of (the stability) of the World
Income Distribution
• On the Differences between Rich and
Poor
Macroeconomics
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SLIDE 9
Log GDP/person 2000
Log GDP/person 1960
Macroeconomics
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SLIDE 10
Log GDP/person 2000
Log GDP/person 1960
Macroeconomics
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SLIDE 11
Another Perspective on Nonconvergence/Nondivergence
Macroeconomics
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SLIDE 12
The Difference between Rich
(Productive) and Poor (Unproductive)
Countries
• If Tanzania were to grow at the long term US
rate of 1,8% per year, it would take 235 years
to reach the 2000 US per capita GDP.
• The range of growth rates from 1960 to 2000
goes from -2% ((Democratic Republic of Congo)
to 6.4% (Taiwan). Forty year differences in
growth rates of this magnitude have enormous
consequences for standards of living.
Macroeconomics
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SLIDE 13
Days the typical US citizen needs
to produce the equivalent to other
countries GDP per capita
400
350
250
200
150
100
50
Sp
ai
n
Ar
ge
nt
in
a
Le
ba
So
no
n
ut
h
Af
ric
a
W
or
ld
Ja
m
ai
ca
Th
ai
la
nd
Al
ge
ria
Ch
in
a
Cu
ba
M
or
oc
co
Pa
kis
M
ta
oz
am n
bi
qu
Zi
e
m
ba
bw
e
0
US
Days
300
Macroeconomics
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SLIDE 14
(5) Differences in Growth
Performance
• Heterogeneity in economic growth rates
• Geographic growth patterns
Macroeconomics
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SLIDE 15
Growth rate of per capita GDP 1960-2000
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SLIDE 16
As a rough generalization for regional growth experiences:
-Sub-Saharan Africa started relatively poor in 1960 and
grew at the lowest rate, so it ended by far the poorest
area in 2000.
-Asia started only slightly above Africa in many cases but
grew rapidly and ended up mostly in the middle.
-Latin America started in the mid to high range, grew
somewhat below average, and therefore ended up
mostly in the middle along with Asia.
-OECD countries started highest in 1960, grew in a middle
range or better, and therefore ended up still the richest.
Macroeconomics
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SLIDE 17
Macroeconomics
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SLIDE 18