Determinants of Economic Growth.

• Author: Knack, Stephen

By Robert Barro.

Cambridge, MA: MIT Press, 1997. Pp. xii, 145. $22.50.

This volume encompasses three essays on the empirical determinants of economic growth. These essays are based on Barro's Lionel Robbins Memorial Lectures, delivered at the London School of Economics in February 1996, during a year he spent at the Bank of England on leave from Harvard.

Having long since established himself as one of the world's leading macroeconomic theoreticians, Barro also has become the leading empiricist in the cross-country growth literature. The first essay in this volume is a broad overview of the empirical correlates of growth; it is the latest in a series of works building on his 1991 Quarterly Journal of Economics article, a standard reference in the field. The second essay focuses on the relationship of democracy to growth, finding a curvilinear pattern by which intermediate levels of civil liberties and political rights appear most favorable to growth. The third essay examines inflation's association with growth, finding that levels exceeding 20% impair growth.

In the first essay, Barro finds evidence of convergence in per capita incomes, conditional on human capital levels. Growth is positively correlated with initial values for male educational attainment and with life expectancy and negatively correlated with fertility rates. Growth is sensitive to economic policies, increasing with a subjective index of property rights and decreasing with government consumption expenditures. Favorable terms-of-trade shifts increase growth. Most prominently omitted by Barro, among variables often shown in this literature to be strongly related to growth, are the trade intensity ratio and the black market premium.

The rate of convergence estimated by Barro is 2.5% per year, meaning that it would take 27 years to close half the gap between current and steady-state output levels and 89 years to close 90% of the gap. This 2.5% estimate is strikingly similar to convergence rates Barro has elsewhere estimated for U.S. states or regions of other countries - despite the much greater homogeneity of policies, institutions, and preferences (savings, fertility) within than across nations. Note, however, that this common 2.5% figure does not mean that it will take Mississippi as long to catch up to Connecticut as it will for the Congo to catch up to the U.S.: Mississippi's steady-state output level is likely very near that of Connecticut's because of the relative...