Economic Quarterly

There are large differences in welfare—measured as gross domestic product (GDP) per capita—across nations. Over time, there are numerous country experiences in relative income of catch-up, collapse, and catch-up followed by a decline. What explains why some countries are rich and others poor? What are the determinants of catch up and collapse in relative income for individual countries? Assessing the determinants of income levels and growth across countries has been a challenging and exciting task in the recent literature of growth economics. I review the literature with a focus on quantitative explorations. A distinctive feature of the recent literature is an emphasis on resource allocation across heterogeneous productive units where these units can generically refer to sectors/industries or establishments. Substantial work remains to be done on identifying the fundamental determinants of resource allocation across productive units.