Institutional Determinants of Growth

Output per worker is correlated with productivity (Solow residual) is 0.89: richer countries tend to be more productive and vice versa (Figure I). Productivity is also correlated with human capital: 0.52. Much of the differences between output in the US and in LDCs is due to differences in productivity rather than due to factor endowments (Table I). Capital intensity, human capital and productivity explain differences in output per worker between five richest and five poorest countries with factors of 1.8, 2.2 and 8.3.