Industrialization, Convergence, and Patterns of Growth

An examination is made of the most widely used 3 explanatory variables in growth regressions: 1. the investment to gross domestic product ratio, 2. the percentage of age group enrolled in secondary education, and 3. the rate of population growth. Both parametric and nonparametric analyses show that these variables cannot explain the stylized nonlinear (humped) pattern in growth. Using the increase in the portion of the labor force employed in manufacturing production as a proxy variable for industrialization, an analysis is conducted to determine if industrialization might be a factor in the growth. Along with the proxy variables for capital accumulation, this variable appears to explain the pattern in growth suitably. High income countries grew faster than low income countries because high income countries accumulated both physical and human capital faster, but middle income countries grew even faster because of drastic industrialization.