S-shaped Transition and Catapult Effects

Among today’s rich economies, per capita output levels diverged before converging to the levels of the frontier economy. Since frontier economies grew at stable rates, non-frontier economies display an S-shaped transition path. Along this transition, there are "catapult effects": longer episodes of stagnation are associated with faster subsequent rates of convergence to the frontier. Many of today’s poor countries also follow this pattern of growth. We construct and quantitatively assess a model that captures the S-shaped transition with catapult effects. Deviations in per capita output from frontier levels are endogenous, while conventional growth accounting would classify these as TFP differences.