Barro: Economic Growth in a Cross Section of Countries

RJ Barro, “Economic Growth in a Cross Section of Countries,” NBER Working Paper (1991).

"For 98 countries in the period of 1960-1985, the growth rate of real per capita GDP is positively related to initial human capital (proxied by 1960 school enrollment rates) and negatively related to the initial (1960) level of real per capital GDP. Countries with higher human capital also have lower fertility rates and higher ratios of physical investment to GDP. Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment. Growth rates are positively related to measures of political stability and inversely related to a proxy for market distortions"

In standard neoclassical models of economic growth, a country's growth rate tends to increase in an inverse relationship with the relative size of that country's starting degree of income. "The main element behind the convergence result in neoclassical growth models is diminishing returns to reproducible capital. Poor countries, with low ratios of capital to labor, have high marginal products of capital and thereby tend to grow at high rates. This tendency for low-income countries to grow at high rates is reinforced in extensions of the neoclassical models that allow for international mobility of capital and technology" (407). However, this study claims that this does not fit with empirical evidence.

"Although the simple correlation between per capita growth...and the initial...level of per capita GDP is close to zero, the correlation becomes substantially negative if measures of initial human capital...are held constant. Moreover, given the level of initial per capital GDP, the growth rate is substantially positively related to the starting amount of human capital. Thus, poor countries tend to catch up with rich countries if the poor countries have high human capital per person...but not otherwise. As a related matter, countries with high human capital have low fertility rates and high ratios of physical investment in GDP" (438).