Volatility and Economic Growth in the Twentieth Century

TL;DR

This paper examines the distribution and dynamics of economic growth and volatility across countries during the twentieth century, revealing shifts in the relationship between country size and volatility over time.

Contribution

It provides empirical analysis of growth rate heterogeneity and the changing scale relation between volatility and country size throughout the century.

Findings

High heterogeneity in GDP per capita growth rates across regions and development levels.

No significant size-volatility relation during early 20th century conflicts.

Emergence of a negative size-volatility relation after 1956.

Abstract

The twentieth century was a period of outstanding economic growth together with an unequal income distribution. This paper analyses the international distribution of growth rates and its dynamics during the twentieth century. We show that the whole century is characterized by a high heterogeneity in the distribution of GDP per capita growth rates, which is reflected in different shapes and a persistent asymmetry of the distributions at the regional level and for countries of different development levels. We find that in the context of the global conflicts that characterized the first half of the twentieth century and involved mainly large economies, the well-known negative scale relation between volatility and size of countries is not significant. After the year 1956, a redistribution of volatility leads to a significant negative scale-relation, which has been recently considered as a robust feature of the evolution of economic organizations. Our results contribute with more empirical facts that call the attention to traditional macroeconomic theories to better explain the underlying complexity of the growth process and sheds light on its historical evolution.