THE GROWING GAP BETWEEN RICH AND POOR COUNTRIES - A PROPOSED EXPLANATION

Making use of data in the Penn World Table (Mark 5), this study seeks to explain the widely reported pattern of increasing divergence of per capita income levels between high and low-income countries and among low-income countries. Tests based on one-on-one comparisons of real gr owth in 1960-88 with starting levels of income per capita imply that i ncreasing divergence of per capita income levels was largely due to di fferences between population growth and labor force growth that varied with income level. Further evidence is provided in the form of crossc ountry growth regressions in which, with population growth divided int o labor force growth and the amount by which population growth exceeds labor force growth, only the part of population growth that represent s changes in the dependency ratio is closely linked to long-term growt h. Copyright (C) 1996 Elsevier Science Ltd