Economic Growth: A Channel Accounting Exercise Wei-Kang Wong∗

This paper formalizes channel accounting, a method that systematically decomposes the channels through which the determinants of economic growth operate, and applies it to the data. Under channel accounting, the determinants could affect aggregate productivity growth through physical capital ac-cumulation, through human capital acquisition, and through growth in total factor productivity (TFP). Methodologically, channel accounting combines growth accounting with regression analysis. With this method, it becomes clear that TFP growth, not factor accumulation, is what accounts for conditional con-vergence. This finding is extremely robust. There is no evidence that rich and poor countries converge through different channels