Thursday, March 29, 2012

Intriguing:
An increase in the capital-labor ratio was usually followed by a half century in which rich countries raised output per worker at that higher ratio. Then the rich countries moved on to a higher capital-ratio, and technical progress ceased at the lower ratio they abandoned. Most of the benefits of technical progress accrued to the rich countries that pioneered it. It is remarkable that countries in 1990 with low capital labor ratios achieved an output per worker that was no higher than countries with the same capital labor ratio in 1820. In the course of the last two hundred years, the rich countries created the production function of the world that defines the growth possibilities of poor countries today.

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