Chapter_6 - Narrowing the Economic Gap in the 21st Century...

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Narrowing the Economic Gap in the 21 st Century Stephen L. Parente University of Illinois November 6, 2009
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I. Introduction c Today, huge differences in international incomes.
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I. Introduction c Today, huge differences in international incomes. c In 2000, the average citizen living in the United States was more than 50 times richer than the average person living in Tanzania, or Burundi.
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I. Introduction c Today, huge differences in international incomes. c Three centuries ago, little difference in incomes.
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I. Introduction c Question ? What will happen in the 21 st Century?
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I. Introduction Answer: The Good News-
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I. Introduction Answer: The Good News- c Disparity has effectively stopped increasing as all but sub-Sahara Africa are experiencing sustained growth.
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I. Introduction Answer: The Good News- c Disparity has effectively stopped increasing as all but sub-Sahara Africa are experiencing sustained growth. c Catch-up in some late starters. Indeed, there are advantages to being a later starter.
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I. Introduction Answer: The BAD News-
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I. Introduction Answer: The BAD News- c Catch-up is not automatic. c Requires changes, reforms that will be resisted by subsets of population. c Not sure if poor countries have the political willpower to make the necessary changes.
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II. Some Facts - Great Divergence c Current huge disparity is the result of countries starting to experience economic growth at different dates.
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II. Some Facts - Great Divergence c Current huge disparity is the result of countries starting to experience economic growth at different dates. c Economic growth first begins in England in the 18th Century. Starts shortly thereafter in U.S. and Western Europe
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II. Some Facts - Great Divergence c Current huge disparity is the result of countries starting to experience economic growth at different dates. c Economic growth first begins in England in the 18th Century. Starts shortly thereafter in U.S. and Western Europe c Many countries only recently have begun to realize sustained increases in per capita income.
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II. Some Facts- Differences in Starting Dates 1800 1850 1900 1950 2000 Japan Brazil India Leader Mexico 500 1,000 2,000 4,000 8,000 16,000 32,000
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II. Some Facts- Evolution of International Incomes: 1700-1990 1700 1750 1800 1850 1900 1950 2000 1/2 1/4 1/8 1/16 W es tern E urope Latin A m eric a A s ia A fric a 1
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II. Some Facts - Catch-Up c Post War Experience of Western Europe c Growth Miracles of Japan, S. Korea, Taiwan, Singapore, China, Botswana Doubled their living standard in a decade or less All Post 1950 Phenomenon Limited to countries that were poor when miracle began
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II. Some Facts- Advantage with Being Late Starter 0 20 40 60 80 1820 1860 1900 1940 1980 N.Z. U.K.
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This note was uploaded on 04/13/2011 for the course ECON 509 taught by Professor Villamil during the Fall '08 term at University of Illinois, Urbana Champaign.

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Chapter_6 - Narrowing the Economic Gap in the 21st Century...

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