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Do Mature Economies Grow Exponentially?

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  • Lange, Steffen
  • Pütz, Peter
  • Kopp, Thomas

Abstract

In academic discussions and in public debate, economic growth is commonly presumed to be exponential. Economic theories model growth in an exponential manner and central policy institutions regard growth rates of 2–3% to be normal, also implying growth to be exponential. In this paper we investigate empirically whether economic growth is indeed exponential by estimating autoregressive integrated moving average time series models based on gross domestic product data for 18 mature economies from 1960 to 2013. Our findings cast doubts on whether these commonly discussed economic growth paths reflect the economic reality: only two out of 18 mature countries depict exponential growth rates above these levels. Five have lower exponential growth and the development of eleven countries exhibit rather linear growth. Additionally, we show that prominent theories of economic growth assume growth to be exponential and that a more heterogeneous set of theories is needed to explain different patterns of growth across time and space.

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  • Lange, Steffen & Pütz, Peter & Kopp, Thomas, 2018. "Do Mature Economies Grow Exponentially?," Ecological Economics, Elsevier, vol. 147(C), pages 123-133.
    • Handle: RePEc:eee:ecolec:v:147:y:2018:i:c:p:123-133
    DOI: 10.1016/j.ecolecon.2018.01.011
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