A Global View of Economic Growth
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This paper provides an interpretation of the global pattern of economic growth in the period following 1950. It uses a model in which growth in an individual country depends on a number of different so-called common trends that are representative of the global economy. Although such trends are common (i.e., shared between countries), the model allows for a differential impact of each trend in each separate country. The general inspiration for this approach lies in the debate on globalization, in which it has been argued that countries are getting more and more integrated, i.e., share more and more common features that determine their growth performance. The results indicate that a model with just three common trends provides an adequate representation of global growth. But rather than leading to convergence of living standards, these common trends lead to divergence, because there are large differences between countries in terms of the local impact of the common trends. Specifically, it is found that divergence of living standards is driven by very long-run differences in growth rates between countries, rather than by specific episodes of catching-up in a limited time span that is more limited than the full 1950-2006 period.