The Empirics of Growth: An Update

Abstract

The past decade has seen an explosion of empirical research on eco-nomic growth and its determinants, yet many of the central issues of inter-est remain unresolved. For instance, no consensus has emerged about the relative contributions of capital accumulation and improvements in total factor productivity in accounting for differences in growth across coun-tries and time. Nor is there agreement about the role of increased educa-tion or the importance of economic policy. Indeed, results from the many studies on a given issue frequently reach opposite conclusions. And two of the main empirical approaches—growth accounting and growth regres-sions—have themselves come under attack, with some researchers going so far as to label them as irrelevant to policymaking. In this paper we argue that, properly implemented and interpreted, both growth accounts and growth regressions are valuable tools, which can improve—and have improved—our understanding of growth experiences across countries. We also show that careful attention to issues of mea-surement and consistency goes a long way in explaining the apparent con-tradictions among findings in the literature. Our analysis combines growth accounts and growth regressions with a focus on measurement and procedural consistency to address the issues raised. The growth accounts are constructed for eighty-four countries that together represent 95 percent of gross world product and 84 percent of world population, over a period of forty years from 1960 to 2000. Appendix A lists the