Decomposing Comparative Development 1880-2020: A Quantitative Dynamic Analysis

This paper demonstrates that a tractable heterogeneous agent endogenous growth model can quantitatively match the stylized empirical facts of long-run development trajectories of income, life expectancy, and fertility for 86 countries over the past 140 years. A decomposition of comparative development differences into contributions of country-specific "deep determinants'', accumulation forces during the historical development process, and balanced growth dynamics sheds new light on the mechanisms leading to country-specific differences in development and establishes a link between the largely disparate literatures on endogenous growth, comparative development, and growth accounting. Structural estimation results show that historical accumulation dynamics explain most of today's comparative development patterns. A quantification of the demographic dividend suggests implications for future growth dynamics.