Why is it so hard for developing countries to make progress?
Ricardo Hausmann Harvard Kennedy School of Government & Center for International Development at Harvard University Lecture presented at the UN General Assembly October 6th, 2008
Global inequality is huge
Income per capita in the United States is over 50 times larger than in Malawi, Burundi, the Democratic Republic of Congo, Tanzania, Niger, Sierra Leon and Guinea-Bissau. Life expectancy in Japan, Australia and Norway is about twice that in Angola, Central African Republic, Mozambique and Zambia What can explain this? Differences in growth rates over a long period of time
Why is growth important?
It accumulates over time Remember the 69 rule! Time to double income = 69/Rate of growth You care about your children On average, mothers are about 25 years older than their children
Why is growth important?
Rate of growth 0.5 1 2 3 4 5 6 7 8 Time to double income 138.0 69.0 34.5 23.0 17.3 13.8 11.5 9.9 8.6 % increase Child - parent 13% 28% 64% 109% 167% 239% 329% 443% 585% Grandchild/ grandparent 1.28 1.64 2.69 4.38 7.11 11.47 18.42 29.46 46.90
If two countries start at the same level of income and diverge in growth rates by 6 percent per year, after 50 years one country will be 18.4 times richer than the other
Growth rate in 1980-2005 vs. initial GDPpc
CHN
Growth in per capita GDP 1980-2005
.06
.08
BTN THA IND IDN LKA
BW A
KOR
G25YPCLCU .02 .04
MUS
-.02
LUX MYS CHL MLT VCT TCD BLZ EGY TUN TUR PAK LSO PRT ESP BGD GBR NOR EST DOM NPL SDN FIN USA AUS SWE LVA LBY HUN AUT JPN MOZ BGR DEUDNK ISR BEL ISL NLD CAN GRC ITAFRA ALB NZL MAR SYC CRI SWZ COL JAM PAN IRN BFA TTO BHR CHE GHA ROM MEX URY SEN SLB GUY SYR ECU FJI PHL DZA SLV MLI BEN KIR PNG AGO VUT JORSUR BRA ARG HND GTM PER GMBMRT CMRCOG NAM KEN KW T NGA BOL ZAF MWI PRY GNB RWA COM NIC VEN GAB ZMB BDI SLE CAF ZWE TGO MDG NER SAU MDA CIV
IRL SGP HKG
0
5
6
7 8 9 10 L25.LYPCUSD Log of GDPpc in...