DevelopingCtys - Developing Countries and Income Gaps...

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Developing Countries and Income Gaps Chapter 22: pp 621-628 Amartya Lahiri University of British Columbia April 2011
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Introduction I What is the income gap between the richest and poorest countries in the world? I Why are the gaps so large? I Is it due to di/erences in factors of production? I Is it due to di/erences in technology levels across countries? I Is it due to insitutional features of di/erent countries? I Has the income gap been narrowing over time? I Why or why not?
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Measurement I Production function Y = F ( K , AL ) F ( K , AL ) = K α ( AL ) 1 & α I α : share of capital in total output. Capital share is: rK Y = F k K Y = α Y K K Y = α
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Measurement (cont.) I Production function can be written as: Y L = & K Y ± α & Y L ± α A 1 & α & Y L ± 1 & α = & K Y ± α A 1 & α Y L = A & K Y ± α 1 & α I How much is A ? I How much is K / Y ?
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Measurement (cont.) I Measured variations across countries y rich y poor = 35 ( K / Y ) rich ( K / Y ) = 3 . 5 α = 0 . 33 I Implication: A rich A & 19 .
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Measurement (cont.) I Large technological di/erences needed I Way around this: assume capital share & 0 . 7.
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This note was uploaded on 04/17/2011 for the course COMM 299 taught by Professor Desrochers during the Spring '08 term at The University of British Columbia.

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DevelopingCtys - Developing Countries and Income Gaps...

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