Modern Economic Growth and Quality of Life: Cross-Sectional and Time Series Evidence

Abstract

This chapter provides a selective survey of ­cross-sectional and time series evidence on the empirical relation between quality of life and modern economic growth. The phenomenon of modern economic growth, so-named by Nobel Laureate Simon Kuznets (1966), marks a new epoch in the economic history of humankind, and first appeared on the world scene in the latter part of the eighteenth century in northwestern Europe. It may be defined as a rapid and sustained rise in real output per head and attendant shifts in production technology, factor input requirements, and the resource allocation of a nation. “Rapid and sustained” is taken here to mean an average growth rate of real GDP per capita that approaches 1.5% per year or more over at least half a century. A rate of 1.5% per year is about the average in the half century before World War I for the group of 15 nations that were the leaders in modern economic growth. It is unprecedented in human history—projecting real per capita output backward from, say 1850, at a 1.5% annual rate would in a matter of a few centuries yield income levels well below the margin for human survival. In the last half of the twentieth century, growth rates in many parts of the developed and developing world have substantially exceeded 1.5% per year.