Why Do Some Countries Produce So Much More Output per Worker than Others?

March 11, 1998 Forthcoming, Quarterly Journal of Economics Output per worker varies enormously across countries. Why? On an accounting basis, our analysis shows that differences in physical capital and educational attainment can only partially explain the variation in output per worker --- we find a large amount of variation in the level of the Solow residual across countries. At a deeper level, we document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which we call social infrastructure. We treat social infrastructure as endogenous, determined historically by location and other factors captured in part by language. This is a revised version of The Productivity of Nations (NBER Working Paper No. 5812).