variables in Ghana and the group of aspirational peers and their subsequent developments until the late 2010s.<sup>17</sup> The resulting graphs, combined in Figure 8, are essentially convergence plots for the respective variables. For example, the top left panel shows that sampled countries starting out with lower schooling levels in the early 1970s have, on average, seen faster improvements thereafter. Applying this exercise to the potential drivers of growth identified above gives us some candidates of explanatory variables that have contributed to the growth and income divergence over that time period.

From Figure 8 one can clearly see that all countries of the group of aspirational peers for which data are available outperformed Ghana in terms of increases of secondary school enrollment and reductions of inflation rates. The weak performance concerning inflation is particularly worrisome as Ghana already started out with high inflation rates in the early 1970s. Additionally, Ghana was one of the few countries in that group where government consumption has increased, not declined. Against the background that key public goods that governments should finance to spur growth (such as education or infrastructure) did not improve considerably over the investigated period, this is additional evidence for potential shortcomings in the macro framework that could be improved, for example, by more prudent monetary policy and a better prioritization of public investment spending. Finally, it is worth noticing that almost all of the sampled countries with strong growth performance have opened up more to trade than Ghana since the early 1970s. Finally, one can see convergence in real exchange rate valuations: countries that started out with overvalued exchange rates in the 1970s saw them decline over the following decades and vice versa, as economic theory suggests. One can also see that Ghana started with the most overvalued real exchange rate and hence also saw a strong subsequent decline. Falling behind the sampled countries with strong growth performance hence cannot be attributed to particularly unfavorable real exchange rate developments.<sup>18</sup> In terms of financial development (top right panel of Figure 8), Ghana started out at a very low level to begin with but did not manage to catch up to other aspirational peers. Especially the fastest-growing economies of Korea and Malaysia saw credit/GDP increasing about twice as fast as Ghana. In terms of infrastructure, the analysis provides a mixed picture. Ghana started out with a comparably low level of telephone lines, which also developed slower than in other countries thereafter. Similarly, coverage of mobile phones was low in the late 1990s, but Ghana managed to catch up at reasonable speed in the decade thereafter. In terms of roads, Ghana started at an average level in the late 1980s and saw the fastest increase among the sampled countries in the two decades thereafter.

> 17 Reliance on the 2010 data allows us to use the data set from the growth regression exercise above. Besides consistency, this also avoids missing data points in more recent years whereas these years are unlikely to substantially change the depicted pattern. Note that for data such as roads and cell phone subscriptions we had to use later starting points since no (or not enough) data were available in the 1970s.

> 18 We did not compare terms of trade changes, banking crises, and commodity price changes because those are cyclical ‘shock’ variables whereas all depicted variables are mainly ‘level’ variables. For example, a low _level_ of schooling in 1970 could suggest a catchup in education over the following decades, reflected in higher _changes_ of schooling. However, a banking crisis in the early 1970s or a positive terms of trade _change_ in the early 1970s is not indicative of any changes in banking crises or accelerated/decelerated (=2nd differences) terms of trade developments in the subsequent decades. Inflation is a special case because even though it is no level variable in the strict sense (since it captures price changes), we view it as capturing the level, or stance, of macroeconomic inflation management.

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