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Economics | Income Distribution | International Economics


Louis Johnston


In the past two centuries, long-term economic growth has been defined by The Great Divergence, where the gap of income distribution has widened as a result of some nations experiencing modern economic growth while others have remained stagnant in their economic well-being. This panel data research examines differences in income across countries by applying development accounting to analyze differences in per capita gross domestic product (GDP) and predict each country’s total factor productivity (TFP). Data from the Penn World Tables were collected and categorized into groups based on GDP per capita to create a sample of 144 countries in 10-year intervals from the years 1990-2019. Variables gathered from the Penn World Tables included engaged persons, capital stock, real GDP, and a human capital index. Through observing empirical evidence with economic data, significant evidence supports the hypothesis that human capital is influential in a country’s total factor productivity. Results of various analyses illustrate the significant impact income class has on the correlation between human capital and total factor productivity.