Divergence, Big Time

TLDR: In the last century, incomes in the less developed countries have fallen far behind those in the "developed" countries, both proportionately and absolutely as discussed by the authors, and this divergence is the result of very different patterns in the long-run economic performance of two sets of countries.

Abstract: ivergence in relative productivity levels and living standards is the dominant feature of modern economic history. In the last century, incomes in the "less developed" (or euphemistically, the "developing") countries have fallen far behind those in the "developed" countries, both proportionately and absolutely. I estimate that from 1870 to 1990 the ratio of per capita incomes between the richest and the poorest countries increased by roughly a factor of five and that the difference in income between the richest country and all others has increased by an order of magnitude.' This divergence is the result of the very different patterns in the long-run economic performance of two sets of countries. One set of countries-call them the "developed" or the "advanced capitalist" (Maddison, 1995) or the "high income OECD" (World Bank, 1995) -is easily, if awkwardly, identified as European countries and their offshoots plus Japan. Since 1870, the long-run growth rates of these countries have been rapid (by previous historical standards), their growth rates have been remarkably similar, and the poorer members of the group grew sufficiently faster to produce considerable convergence in absolute income levels. The other set of countries, called the "developing" or "less developed" or "nonindustrialized," can be easily, if still awkwardly, defined only as "the other set of countries," as they have nothing else in common. The growth rates of this set of countries have been, on average, slower than the richer countries, producing divergence in ' To put it another way, the standard deviation of (natural log) GDP per capita across all countries has increased between 60 percent and 100 percent since 1870, in spite of the convergence amongst the richest.