Economic growth and economic development 36

Introduction to Modern Economic Growth While there is no convergence for the entire world, when we look among the “OECD” nations,1 we see a different pattern Figure 1.15 shows that there is a strong negative relationship between log GDP per worker in 1960 and the annual growth rate between 1960 and 2000 among the OECD countries What distinguishes this sample from the entire world sample is the relative homogeneity of the OECD countries, which have much more similar institutions, policies and initial conditions than the entire world This suggests that there might be a type of conditional convergence when we control for certain country characteristics potentially affecting economic growth JPN 04 IRL PRT LUX ESP GRC annual growth rate 1960-2000 01 02 03 AUT ITA FIN FRA BEL NOR ISL GBR USA DNK SWE NLD AUS CAN CHE NZL 9.5 log gdp per worker 1960 10 10.5 Figure 1.15 Annual growth rate of GDP per worker between 1960 and 2000 versus log GDP per worker in 1960 for core OECD countries This is what the vector Xt−1 captures in equation (1.1) In particular, when this vector includes variables such as years of schooling or life expectancy, Barro and 1That is, the initial members of the OECD club plotted in this picture, which excludes more recent OECD members such as Turkey, Mexico and Korea 22