Tuesday

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 9 The Real Economy in the Long Run

Chapter 25 of 36 Production and Growth

Section 3 of 23

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Table 1 shows real GDP per person data for thirteen countries.

Beginning year varies because of data availability.

United States year 2006 income per person $44,260 is

· about six times China’s $7740

· about twelve times India’s $3800

The poorest countries in 2006 have income levels the rich countries had many decades ago.

The typical person in India in 2006 had less real income ($3800) than the typical resident of England in 1870 ($4502).

The typical person in Bangladesh in 2006 had about two-thirds the real income ($2340) of a typical American a hundred years ago ($3752).

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The Table 1 last column shows each country's growth rate over the time period.

In the United States

· real GDP per person was $3,752 in 1870

· real GDP per person $44,260 in 2006

· the growth rate was 1.83 percent per year

Japan is atop the Table 1 list, with a 2.76 per year growth rate percent.

Japan’s average income a hundred years ago was somewhat higher than Mexico's, and far behind Argentina's.

But because of its rapid growth Japan is now an economic superpower, with average income

· more than twice of Mexico and Argentina

· similar to Germany, Canada, the United Kingdom

At the bottom are Bangladesh and Pakistan, with average yearly growth rates of less than 1.4 percent.

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The ranking of countries by real GDP per person changes over time, because of growth rate differences.

The United Kingdom has fallen in real GDP per person ranking.

In 1870, the United Kingdom was the richest country in the world, with average income about 20 percent higher than the United States and more than twice Canada's.

In 2006, average income in the United Kingdom was 20 percent below the United States and similar to Canada's.

Table 1A shows updated data.

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These data show

· the world's richest countries are not guaranteed to stay the richest

· the world's poorest countries are not doomed to remain the poorest

What explains these changes over time?

Why do some countries move up rapidly while others lag?

These questions will be addressed in following sections.

… …

why do some countries become rich?

naze ikutsuka no kuni yutaka ni nari?