Economic Transformation, Population Growth, and the Long-Run World Income Distribution
IMF Working Papers, January 1, 2006
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- Economic Transformation, Population Growth, and the Long-Run World Income Distribution
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Bibliographic details
- Authors: Marcos Chamon, Michael R Kremer
- Published: January 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862812.001
Summary of model and research question
- The paper studies the long-run evolution of the world economy in a model where countries' opportunities to develop depend on their trade with advanced economies.
- As developing countries become advanced, they further improve trade opportunities for the remaining developing countries.
- Convergence to widespread prosperity depends on:
- the population growth differential between developing and advanced economies,
- the rate at which countries develop,
- potentially on initial conditions.
Key findings and projections
- Whether the world economy converges to widespread prosperity is conditional on demographic and development dynamics rather than automatic.
- A calibration using historical data suggests that the long-run prospects for lagging developing regions, such as Africa, likely hinge on the sufficiently rapid development of China and India.
Calibration and empirical approach
- The paper uses a calibration based on historical data to assess long-run prospects for lagging developing regions.
- The calibration links development spillovers through trade with population growth differentials and rates of country development.
Policy-relevant implications
- Accelerating development in large developing economies (specifically China and India in the calibration) has important spillover effects for other lagging regions.
- Demographic dynamics (population growth differentials) are a critical determinant of whether global convergence to higher incomes is feasible.