Hypotheses

Based on the above, we test the following hypotheses:

I. That countries can be placed in three distinct groups, as follows: Group A consists of advanced countries (mainly OECD) that have largely caught up to the US, in terms of GDP per capita, but are no longer progressing in this area, for one reason or another. Group B consists of countries that are now growing faster than the US (that is, catching up) and have done so fairly consistently for the past 20 years or so. Group C consists of countries, most of which are not growing vis-à-vis the US, or have only started to do so very recently (such as the transition economies of Eastern Europe and the former USSR). Group C countries other than those in transition are overwhelmingly characterized by one or more growth stoppers such as political-ethnic or religious violence, monetary instability and/or lack of a legal framework of laws that are enforced.

II. That invested capital (K) and labor (L) are important factors of production, but that accumulation of capital and labor do not explain economic growth. We conjecture that 'useful work' output - denoted U hereafter - is a third factor of production and that U (or some proxy thereof) has significant explanatory power both for Group A countries and Group B countries, but not for Group C countries.

III. That electrification or electricity consumption per capita, plus some fraction of petroleum consumption, is the most plausible proxy.5 The underlying reason is that electricity is, itself, essentially a form of useful work, while the other major form of useful work in modern economies (mechanical work by mobile internal combustion engines) is based on the consumption of liquid petroleum products.

IV. That some of the other factors affecting growth can be accounted for by introducing dummy variables, equivalent to grouping countries according to other criteria.

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