Pritchett: Divergence, Big Time

L Pritchett, “Divergence, Big Time,” Development (1995).

"Recently, much attention has been paid in the literature on economic growth to the phenomenon of 'conditional convergence,' the tendency of economies with lower-level incomes to grow faster, conditional on their rate of factor accumulation...regardless of conditional convergence, perhaps the basic fact of modern economic history is massive absolute divergence in the distribution of income across countries...[the author] estimates that between 1879 and 1985 the ratio of incomes in the richest and poorest countries increased six fold, the standard deviation of (natural log_ per capita incomes increased by between 60 and 100 percent, and the average income gap between the richest and poorest countries grew almost nine fold" (abstract).

The recent focus on convergence of income or productivity per capital is based on faulty numbers from 1870. Firstly, most countries that could afford to produce good numbers did produce good numers and these countries obviously had higher levels of production and income. There also had to be many assumptions made about the initial levels of production and income for many countries. To fit the model implied in the convergence literature, countries would have had to be impossibly poor in 1870.

Pritchett uses two methods to determine the levels of divergence.

"Whichever way the debate about whether there has been some 'conditional' convergence in the recent period is settled, the fact remains that one overwhelming feature of the period of modern economic growth is massive divergence of absolute and relative incomes across countries, a fact which must be grappled with in a fully satisfactory model of economic growth and development" (37).