Economic growth and economic development 38

.06 Introduction to Modern Economic Growth KOR average growth gdp per capita 1960-2000 -.02 02 04 HKG BRB COG ZWE IRL PRT MYS MUS ROM CPV LUX ESP IDN GRC NOR AUT FIN ITA ISR PAK DOM ISLIND BRA BEL SYR FRA EGY GAB MAR USA NLD CAN TTOCHL PAN TUR LKA DNK AUS SWE IRNGBR MEX COL PRY MWIDZA CHE ECU PHL JOR CRI GTM URY NZL GHAGNB KEN BGD ZAF PER ARG JAM SLV TZA ETH CMR HND CIVBOL BEN GIN BDI MLI RWA TGO SEN VEN COM TCD ZMB MDG MOZ NIC NER -.05 THA CHN JPN SYC LSO NPL UGA GMB BFA GNQ NGA 05 average growth investment 1960-2000 15 Figure 1.16 The relationship between average growth of GDP per capita and average growth of investments to GDP ratio, 1960-2000 For this reason, we start with the more modest question of what factors correlate with post-war economic growth With an eye to the theories that will come in the next two chapters, the two obvious candidates to look at are investments in physical capital and in human capital Figure 1.16 shows a strong positive association between the average growth of investment to GDP ratio and economic growth Figure 1.17 shows a positive correlation between average years of schooling and economic growth These figures therefore suggest that the countries that have grown faster are typically those that have invested more in physical capital and those that started out the postwar era with greater human capital It has to be stressed that these figures not imply that physical or human capital investment are the causes of economic growth (even though we expect from basic economic theory that they should contribute to increasing output) So far these are simply correlations, and they are likely driven, at 24