Andrés Palacio

Senior lecturer

The Social Capability Index and Income Convergence

Author

Andrés Palacio

Summary, in English

Domestic social capabilities are a set of national characteristics for understanding why some countries grow faster than others. Yet there is no clear agreement on the main characteristics of these capabilities and therefore they have been neglected in the income convergence debate. The paper presents an index for revisiting the role of social capabilities in this debate. A relatively socially advanced society is more likely to improve the prospects of income convergence. The index is restricted to 4 capabilities: diversify the economy (transformation), distribute the benefits of growth (inclusion), control price inflation (autonomy) and provide public goods (accountability). Using a sample of 27 countries from Africa, Asia and Latin America over the period 1990-2010, we show that this set of capabilities is related to income growth and to long run performance in manufacturing. The index confirms the consolidation of the East Asian tigers and the rise of China, but the laggard performance on India. Indonesia represents the median in the index, surrounded by Latin American countries like Venezuela and Brazil. In the African context, we see Mauritius standing further away from Ethiopia, South Africa and Nigeria.

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