By the end of the 20th century the population was 37 million. Services had replaced agriculture as the leading export industry in most countries. The average per capita income of the 28 countries had reached US$7,666, with 13 countries exceeding this average. But the income gap among countries in the region had widened considerably.

During the 20th century some countries in the Caribbean grew rapidly, some grew moderately and some hardly grew at all. Many had ups and downs, due to external shocks such as the 1930s world depression and the 1980s debt crisis. By 1998 the gap between the richest country in the region (Cayman Islands) and the poorest (Haiti) was of the order of 65 to 1--far more than the income gap between the Caribbean as a whole and the developed countries.

What explains these wide differences in growth performance? This was the subject of a two-year investigation by a team of Caribbean and English researchers sponsored by the Inter-American Development Bank and the Social Science Research Council in New York. The results have just been published in Integration and Trade, the journal of the Institute for the Integration of Latin America and the Caribbean.

They were reviewed last week at a seminar at the headquarters of the Association of Caribbean States (ACS). The statistics cited above are taken from the project's data base.

The researchers had examined the relative contribution of four factors to growth performance: foreign trade; the quality of institutions; investment in human capital; and the management of the natural environment. The analysis combined quantitative and qualitative methods.

The conclusion from the econometric analysis points to export performance as the single most important explanatory variable of growth performance. Intuitively, this finding is hardly surprising. Caribbean economies are open and trade-dependent. The most successful in the past half-century are those that have diversified into the export of high-value services such as tourism and international banking.

But this finding leaves many questions unanswered. Why were there such wide variations in export performance among countries? For instance, what role did economic policy and macro-economic management play? The econometric analysis uses exchange rate stability as the proxy measure of the quality of institutions and of macro-economic management. But, as the authors themselves admit, this is a very limited indicator.

Other factors which need to be investigated are size, resource endowment, geographical location, social and political stability and political status (which impact on investor confidence). The case studies of seven countries in the region provide insights into these factors, which could not easily be measured econometrically.

Since each author was left free to employ his or her own analytical framework, the results of the case studies are not easily comparable. But Phase 2 of the project, which was planned at last week's seminar, will deepen the analysis of these factors and draw out the lessons for policy.

The data base from the project is available at:
http://www.ssrc.org/programs/latinamerica/program_initiatives/percapitagaps-Caribbean/index.page. Links to the database and papers from the project will soon be available on the ACS Website.

Professor Norman Girvan is Secretary General of the Association of Caribbean States. The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org.

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June 21, 2002