Progress in closing the productivity gap occurred mainly in commodity-importing EMDEs; commodity exporters, on average, moved further away from the frontier ( **Figure 2** ). Among the regions, EAP, ECA, and SAR had average productivity growth in 2010-18 that exceeded that of advanced economies by a significant margin. In other regions, many of which have large numbers of commodity exporters, productivity growth was similar to, or below, that of advanced economies.

The faster pace of productivity growth since 2000 has shifted the distribution of productivity levels to the right but has yet to lead to a material proportion of EMDEs reducing the income gap with advanced economies relative to the 1970s, particularly given the lackluster growth experienced in the 1980s and early 1990s. SAR, EAP, and ECA are the only regions where a material proportion of EMDEs have a smaller gap than in the 1970s today. Only one-third of EMDEs have narrowed their productivity gaps over the past 50 years. However, the economies where productivity gaps have narrowed since the 1970s account for around 70 percent of the population of EMDEs: a clear majority of the population of EMDEs live in economies where the productivity gap has narrowed.

Despite the slow progress in closing productivity gaps, absolute productivity levels have improved in many of the poorest economies. Like the productivity distribution in the 2010s, the productivity distribution in the 1990s featured a concentration of countries around low-productivity levels and another concentration close to the average advanced economy productivity level. However, since the 1990s, the share of economies in the lowest productivity region (below $10,000) has almost halved. Using the World Bank’s income classifications, around half of the economies classified as “low income” in 1990 are now classified as “lower-middle” or “upper-middle” income economies.<sup>5</sup> And 60 percent of economies are now classified as high or upper-middle-income economies, compared to just 35 percent in 1990. However, World Bank income thresholds are only adjusted for inflation—the threshold for the “high income” classification has remained unchanged in real terms since 1990. Therefore, they do not imply convergence to the frontier but rather a broad-based absolute improvement.

Historical episodes of convergence towards the frontier are rare (Durlauf et al., 2005; Johnson and Papageorgiou, Johnson and Papageorgiou; Rodrik, 2011). Full convergence to the frontier requires sustained high productivity growth over many decades. Just nine economies transitioned into the top quartile of incomes between the 1950s and the post-crisis period.<sup>6</sup> Of these, Equatorial Guinea and Oman benefited from oil and gas exploration; Japan, Cyprus, and Portugal were already close to the highest quartile in 1950; the Republic of Korea, Hong Kong SAR, and Singapore were “Asian Miracle” economies, with their success attributed to a number of factors, including high education levels, strong governance, and industrial policies that included export promotion (Leipziger and Thomas, 1993).

In summary, productivity growth improved for a broad set of EMDEs starting around 2000 but has not yet led to a material reduction in productivity gaps with advanced economies. In some cases, these improvements only partially unwound previous productivity growth underperformance,

> 5See also _Special Focus 2.1_ (World Bank, 2019b)

> 6This statement relies on convergence in income per capita instead of labor productivity, allowing a sample of 137 economies since 1950, compared to 103 since 1970 for labor productivity. The Maddison Project database of income per capita for 137 economies since 1950 provides a much wider coverage than the labor productivity database used throughout this chapter – the productivity dataset falls to 49 economies for the same period of data. Output per capita provides a less precise measure of productivity, not accounting for changes in labor force participation or the share of the working-age population.

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