Real GDP per capita in developed countries

TL;DR

This paper models the growth of real GDP per capita in developed countries as a combination of a decreasing trend and population-related fluctuations, analyzing data from 19 OECD nations over more than five decades.

Contribution

It introduces a model separating economic trend and fluctuations, and provides empirical analysis of GDP growth patterns in major developed countries from 1950 to 2004.

Findings

Weak linear trend in GDP increments for largest economies.

Fluctuations follow a quasi-normal or Levy distribution.

Developing countries underperform despite higher relative growth.

Abstract

Growth rate of real GDP per capita is represented as a sum of two components -- a monotonically decreasing economic trend and fluctuations related to a specific age population change. The economic trend is modeled by an inverse function of real GDP per capita with a numerator potentially constant for the largest developed economies. Statistical analysis of 19 selected OECD countries for the period between 1950 and 2004 shows a very weak linear trend in the annual GDP per capita increment for the largest economies: the USA, Japan, France, Italy, and Spain. The UK, Australia, and Canada show a larger positive linear trend. The fluctuations around the trend values are characterized by a quasi-normal distribution with potentially Levy distribution for far tails. Developing countries demonstrate the increment values far below the mean increment for the most developed economies. This indicates an underperformance in spite of large relative growth rates.