Monday, November 17, 2014

"An extremely persistent slowdown in long run growth rates since the 1970s"


Gavyn Davies, from his blog at FT:
NOTE: Davies' two "here" links didn't work for me, so I disabled them.
UPDATE 13 DECEMBER 2014: APPARENTLY DAVIES' LINKS DID WORK. I JUST NOW FOUND
SEVERAL COPIES OF TWO PDF FILES IN MY DOWNLOADS FOLDER. OH, WELL.
Three of my colleagues at Fulcrum have been examining the behaviour of long run GDP growth in the advanced economies, using developments of dynamic factor models to produce real time estimates of long run GDP growth rates. See the summary paper here by Juan Antolin-Diaz, Thomas Drechsel and Ivan Petrella, and the more academic version here.


The results (Graph 1) show an extremely persistent slowdown in long run growth rates since the 1970s, not a sudden decline after 2008. This looks more persistent for the G7 as a whole than it does for individual countries, where there is more variation in the pattern through time.

Averaged across the G7, the slowdown can be traced to trend declines in both population growth and (especially) labour productivity growth, which together have resulted in a halving in long run GDP growth from over 4 per cent in 1970 to 2 per cent now.

Impressive graph.

EDIT: Crossing things out:
I remember, probably 30 years ago, reading a review of a book by Glynn and Gavyn Davies. It was... At the time, the name of the book reminded me of Sidney Homer's A History of Interest Rates. I think the title was A History of Money. Glynn was Gavyn's father. This is all from memory; I could have it all wrong.

There ya go. The title: A History of Money: From Ancient Times to the Present Day. Author: Glyn Davies, only one "n". Maybe Gavyn wrote the review? I definitely remember both names. First published in 1994, according to Amazon; I was way off on the date. Price of the hardcover book, new, at Amazon? "From $2000". Oh, maybe that's why I didn't buy the book.

Anyway, that graph is huge.

5 comments:

Gobanian said...

You are wrong. His name is Gavyn Davies. His father was not an economist.

The Arthurian said...

My memory is often unreliable.

Thank you. I will look it up.

The Arthurian said...

Okay... According to Wikipedia,

Glyn Davies (22 May 1919 – 6 January 2003), was a Welsh economist, best known for his 1994 book, A History Of Money From Ancient Times To The Present Day.

and

He and his wife had four children - Roy, John Eric (born 1952), Kenneth, and Lisa Wise.

No offspring named Gavyn Davies. I don't know where I got that idea.

Interesting how wrong a person can be, no?

Auburn Parks said...

Is it just me or does this persistent slow down in real growth eerily coincide with the real wages and productivity graph?

http://upload.wikimedia.org/wikipedia/commons/7/73/US_productivity_and_real_wages.jpg

Its almost as if economic growth is measured by sales = effective demand and that when consumers have less money to buy things sales = incomes growth slows down.

Who could have predicted that?

Only every honest person who understands even basic economic fundamentals who isnt a conservative supply side ideologue.

P.S. Both of these graphs also coincide with the decline in union membership....just saying.

The Arthurian said...

Auburn, I usually just look at US data. But I do like the idea of taking the "developed" economies as of they were all part of one economy, and looking at trends for that economy. A really macro view.

I imagine the wages-and-productivity graph would be informative, done up that way.