It's not factor accumulation: Stylized facts and growth models

The article documents five stylized facts of economic growth. (1) The "resi dual" (total factor productivity, TFP) rather than factor accumulation acco unts for most of the income and growth differences across countries. (2) In come diverges over the long run. (3) Factor accumulation is persistent whil e growth is not, and the growth path of countries exhibits remarkable varia tion. (4) Economic activity is highly concentrated, with all factors of pro duction flowing to the richest areas. (5) National policies are closely ass ociated with long-run economic growth rates. These facts do not support mod els with diminishing returns, constant returns to scale, some fixed factor of production, or an emphasis on factor accumulation. However, empirical wo rk does not yet decisively distinguish among the different theoretical conc eptions Of TFP growth. Economists should devote more effort toward modeling and quantifying TFP.