Today, more and more researchers are interested in estimating the absolute divergence in income distribution in developed and developing countries. And Lant Pritchett is no exception. In his “Divergence, Big Time” he shows that actual historical statistics are not needed for estimating the ratio of income in the richest and the poorest countries. As far as researchers pay thorough attention to literature on economic growth, Pritchett finds it important to discuss the phenomenon of conditional convergence.
The key argument is that economies with low-level incomes have the tendency to develop faster than economies with higher-income levels. Pritchett argues that lack of reliable historical data on per capita income hinders estimations of long-run convergence. Nonetheless, in his research his proves that divergences can be estimated without historical data. Development of modern economic history is attributed to estimations of divergence in productivity and living standards across the countries.
I agree with Pritchett that the tendency has gained wider attention as economists and analysts should be provided with proper knowledge of why the poorer countries grow faster, why they recover faster from crisis, etc. Economists should be provided with full scene of what is happening globally, why growth rates are different and what constitutes economic development. Pritchett argues that income in developing countries has fallen, whereas the income in developed countries has significantly increased increasing the gap between the rich and the poor.
In particular, long-run economic growth has increased in developed countries, their growth rates remain similar to developing countries, whereas developing countries have the tendency to grow faster to balance convergence in absolute income levels. Interestingly, developing countries are often referred to as the other set of countries, but I can’t agree with such definition because some of the East Asian countries as, for example, China and Japan are swiftly developing and they are very likely to replace the most developed countries within the next years.
Of course, in the end of the 19th century economic development in less developed countries was significantly lower, but today the situation has changed. Pritchett notes that, on average, the growth rates in developing countries are slower contributing to divergence in relative incomes. Nevertheless, Pritchett is right when stating that developed countries are marked by different patterns of growth. Further, Pritchett cites one of the modern economists, Gerschenkron, who argues that the idea of ‘advantage of backwardness’ stimulates developing countries to experiences episodes of rapid economic growth driven by increased productivity.
I agree with researchers as there are many examples of individual developing countries that have illustrated rapid growth as China, for example. Of course, the most of the backward countries have practically no chances to become world leaders. Historical researches claim that such cases are rare. Nevertheless, poorer countries are provided with the potential of economic growth, but strong forces of stagnation and lack of proper resources hinder economic development.
Implosive decline is observed in countries, where society is disintegrated failing to gather economic statistics. Pritchett’s claim that backwardness carries disadvantages is valid. The key challenge is how to overcome disadvantaged posted by stagnation and backwardness. Pritchett concludes that growth theories try to related economic growth to world’s experience. Economic growth in developed and developing countries depends on the level of technological progress, per capita growth, and other internal and external factors.
The author is interested in revealing why some countries are developing rapidly, whereas others are fading and loosing rapid growth. In my opinion, the issues raised in the article are important for modern economic history as the author contributes to understanding the reasons of economic growth. He says that divergence in income levels contributes to hindering economic development. However, the key finding is that the poorer countries have the tendency to grow faster.
Pritchett, Lant. Divergence, Big Time. Journal of Economic Perspectives, 11, 3 (1997); pp. 3-17.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 30 December 2016
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