Growth Rate of the Capital Stock

1. What factors determine the growth rate of the capital stock? 2. Will poorer countries catch up to richer countries because of faster growth of capital

stock? 3. What is the evidence on convergence? 4. Why might countries not converge?

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Our first task in this chapter was to explain the vast differences in living standards that we observe in the world. We now know that this variation is due to differences in physical capital, human capital, and technology. The rough calculations in Section 6.2 “Four Reasons Why GDP Varies across Countries” tell us that variations in physical capital, human capital, and technology all play a role in explaining differences in economic performance. Now we consider these inputs separately. In this section, we look at the accumulation of physical capital. In Section 6.4 “Balanced Growth”, we look at the role of human capital and technology.