1.5 Introduction to Modern Economic Growth Density of coutries 1820 2000 1913 log gdp per capita 10 12 Figure 1.10 Estimates of the distribution of countries according to log GDP per capita in 1820, 1913 and 2000 Figure 1.11 also illustrates the divergence; it depicts the evolution of average income in five groups of countries, Western Offshoots of Europe (the United States, Canada, Australia and New Zealand), Western Europe, Latin America, Asia and Africa It shows the relatively rapid growth of the Western Offshoots and West European countries during the 19th century, while Asia and Africa remained stagnant and Latin America showed little growth The relatively small income gaps in 1820 become much larger by 2000 Another major macroeconomic fact is visible in Figure 1.11: Western Offshoots and West European nations experience a noticeable dip in GDP per capita around 1929, because of the Great Depression Western offshoots, in particular the United States, only recover fully from this large recession just before WWII How an economy can experience such a sharp decline in output and how it recovers from such a 16