China periods. Relatively few countries converged towards the US per capita income in the 19602000 period and, except for the fast-growing South East Asian “tigers”, most of those that converged were relatively high-income countries (chiefly in Europe). Most countries in the world (nearly 70 percent) diverged in that period. By contrast, nearly 80 percent of all countries, including LatAm countries, converged during the China-pull period of 2000-2015 and most of them were low-to-middle-income (the higher-income countries lost ground during this period).

Table 2 in the Appendix provides econometric evidence that confirms the key messages of Figure 1. The table reports the results of regressing the rate of per capita relative income growth against the rate of change of world export shares, controlling for country size, rate of population growth and initial GDP per capita. The results highlight the overwhelming role of exports in growth. They also suggest the existence during 1960-2000 of an apparent commodity curse, as growth in commodity exporting countries tended to lag behind that in other countries. However, this effect was no longer present during 2000-2015. The results also show that population growth tends to hinder per capita income growth, an oft-overlooked feature that contradicts the theoretical steady-state predictions of plain-vanilla neoclassical growth models where population growth is assumed always to boost (rather than drag down) per capita income growth. The reality is that countries with fast population growth are often unable to fully integrate their labor force into productive, formal employment.

The growth accounting decomposition method that was discussed in this section provides the conceptual and empirical background to the analysis of LatAm’s post-WWII growth experience undertaken in the next two sections. Taking into account the structural break in the data introduced by the momentous rise of China in the global economic landscape, this analysis will focus separately on the pre- and post-2000 subperiods.

# **3. Latin American growth during the second half of the twentieth century**

LatAm’s growth performance after WWII and until the rise of China in the early 2000s was rather dismal when compared to that of Southern Europe and South East Asia (Figure 2).<sup>6</sup> LatAm’s per capita income fell steadily from being 50 percent above that of the world in 1950 to around 10 percent below by 2000. Over the same period, Southern Europe’s per capita income, which was similar to that of LatAm in the early 1950s, rose to two-and-a-half times that of the world by 2000. As strikingly, South East Asia’s per capita income, which was barely 40 percent of LatAm’s in the 1950s, rose rapidly starting in the 1970s to a level 60 percent higher than that of the region by 2000.

The 1950-2000 period was marked by the rise of the US, Western Europe, and Japan as the three major engines of world growth, against the background of a powerful post-WWII economic reconstruction momentum. From a trade perspective, therefore, LatAm’s poor growth performance reflects an inability to take advantage of its links to the US economic locomotive, in sharp contrast

> 6 While cross-country data on GDP per capita start in 1950, comparable export data become available no earlier than 1960.

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