SOME COUNTRIES PRODUCE SO MUCH MORE OUTPUT PER WORKER THAN OTHERS: Basic Results

i (2)
Figure 2 plots output per worker against our measured index of social infrastructure. The countries with the highest measured levels of social infrastructure are Switzerland, the United States, and Canada, and all three are among the countries with the highest levels of output per worker. Three countries that are close to the lowest in social infrastructure are Zaire, Haiti, and Bangladesh, and all three have low levels of output per worker.

Consideration of this figure leads to two important questions addressed in this section. First, what is the impact on output per worker of a change in an exogenous variable that leads to a one unit increase in social infrastructure? Second, what is the range of variation of true social infrastructure? We see in Figure 2 that measured social infrastructure varies considerably along this 10-point scale. How much of this is measurement error, and how much variation is there across countries in true social infrastructure? Combining the answers to these two general questions allows us to quantify the overall importance of differences in social infrastructure across countries in explaining differences in long-run economic performance.

Table 2 reports the results for the estimation of the basic relation between output per worker and social infrastructure. Standard errors are computed using a bootstrap method that takes into account the fact that some of the data have been imputed.