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A Comparison of Levels of GDP Per Capita in Developed and Developing Countries, 1700–1980

Published online by Cambridge University Press:  03 March 2009

Angus Maddison
Angus Maddison
Affiliation:
University of Groningen, Netherlands
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Abstract

This paper examines the evolution of the per capita income gap between developed and developing countries. Landes and Kuznets suggest that Western countries already had a big lead before their economic growth accelerated, but Bairoch has recently claimed that European living standards in the mid-eighteenth century were lower than in the rest of the world. I think the existing evidence supports the Landes-Kuznets position, and that Bairoch probably overstates the contemporary income gap and understates per capita income growth in the developing world. But there are contradictory elements in the evidence, on which further research is needed.

Type
Papers Presented at the Forty-Second Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 43 , Issue 1 , March 1983 , pp. 27 - 41
Copyright
Copyright © The Economic History Association 1983

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References

1 See Landes, David S., The Unbound Prometheus (Cambridge, 1969), pp. 13–14.Google Scholar

2 See Deane, Phyllis, The First Industrial Revolution (Cambridge, 1965), p. 7;Google Scholar

and Rosenstein-Rodan, P. N., “International Aid for Underdeveloped Countries,” Review of Economics and Statistics (05 1961), 118–22.Google Scholar

3 See Kuznets, Simon, Population, Capital and Growth (London, 1974), p. 179.Google Scholar

The underlying evidence for his conclusion is presented in Kuznets, , Economic Growth of Nations, (Cambridge, Massachusetts, 1971), chap. 1.CrossRefGoogle Scholar

The benchmark for comparison there is 1965 levels of per capita income converted at exchange rates. He also makes the dubious Rostow-type assumption (p. 25) that modern economic growth in most of the developed world began at dates staggered throughout the nineteenth century, and is therefore comparing developed world performance at a later date than Landes. In an earlier consideration of the same problem (Modern Economic Growth [New Haven, 1966], chap. 7), Kuznets had augmented the relative per capita GDP of developing countries using purchasing power rather than exchange rate conversions, and reached conclusions about the Western lead that were distinctly more cautious.Google Scholar

4 See Bairoch, P. and Lévy-Leboyer, M., eds., Disparities in Economic Development since the Industrial Revolution (London, 1981), p. 7.CrossRefGoogle Scholar

5 This seems to be a “synthesis” from shortcut estimates of Beckerman and Bacon, Bennett, Braithwaite, Cohn Clark, Delahaut and Kirschen, Kravis, Heston, and Summers, and Niewaroski; see Bairoch, P., “Ecarts lntei-natjonaux des Niveaux de Vie avant La Révolution Industriehle,” Les Annales (Jan.-Feb. 1979), 155.Google Scholar

6 See Maddison, Angus, Economic Progress and Policy in Developing Countries (New York, 1970), pp. 278–96. This study covered 22 developing countries and compared their per capita production with that of seven developed countries (France, Germany, Italy, Japan, Britain, the United States, and the Soviet Union).Google Scholar

7 See Kravis, I. B., Heston, A., and Summers, R., World Product and Income (Baltimore, 1982).Google Scholar

8 See Kravis, Heston, and Summers, World Product, p. 27, which compares the Bombach-Paige study with the Gilbert-Kravis study.Google Scholar

9 The Kravis-Heston-Summers multiplier is even bigger at American prices. For 1975 it was 2.77 compared with 2.29 for the comparison (including China) at their international prices (see Table 10).Google Scholar

10 See Kuznets (Population, Capital and Growth, p. 333), who rejects my results because they did not conform to his expectations of relative price differentials (expectations derived from his interpretation of the results of previous expenditure-type comparisons).Google Scholar

11 See Kravis, Heston, Summer, World Product, pp. 30–33 for a discussion of the problem.Google Scholar

12 The distributive margin (for transport, wholesale, and retail trade) added 47 percent to American producer prices for food in the United States in 1967, 70 percent for apparel, 74 percent for footwear, and 111 percent for petroleum products. See “The Input-Output Structure of the U.S. Economy: 1967,” Survey of Current Business (Feb. 1974), 28.Google Scholar

The evidence on distributive output in developing countries is generally weak. Bauer, P. T. and Yamey, B. S., The Economics of Underdeveloped Countries (Cambridge, 1957), pp. 37–42,Google Scholar

stress that distributive activity in these countries is understated by occupational statistics, and it is clear that the distributive content of items sold in very small quantities may be quite high. Nevertheless Kravis, Heston, and Summers themselves mention several factors that suggest higher proportionate trade content in developed countries, due to greater urbanization and the fact that people generally do not grow their own food. They also acknowledge that in intertemporal comparisons the shift from farm to urban consumption would usually lead to an increase in distributive output, which they do not measure in their intercountry approach. (See Kravis, Heston, and Summers, World Product, p. 32.)Google Scholar

13 See Kuznets, Population, Capital and Growth, pp.333,336.Google Scholar

14 See Paige, D. and Bombach, G., A Comparison of National Output and Productivity, O.E.E.C. (Paris, 1959), p. 19,Google Scholar

from which sector price relatives can be derived comparable with those in the last four columns of Table 8. For Britain in 1950 they were 44.8 for services, 70.9 for commodities, 86.6 for agriculture, and 69.3 for industry (that is, the I/A ratio was 0.80 and S/A ratio was 0.52). Kuznets had an I/A ratio of 1.26 for Britain and an S/A ratio of 0.75. See Kuznets, S., Economic Growth of Nations (Cambridge, Massachusetts, 1971), p. 137.CrossRefGoogle Scholar

15 Ibid.