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Are long-run output growth rates falling?

Author

Listed:
  • Mengheng Li

    (Economics Discipline Group, University of Technology Sydney, Australia)

  • Ivan Mendieta-Muñoz

    (Department of Economics, University of Utah, USA)

Abstract

This paper studies the evolution of long-run growth rates in the G-7 countries. We identify a measure of long-run output growth rate with that rate of growth consistent with a constant unemployment rate. The methodology proposed also allows the derivation of the long-run growth rate associated with technical progress by separating the effects derived from movements in the rate of growth of the labour force. To measure its trajectories during the postwar period, we use time-varying parameter models that incorporate both stochastic volatility and a Heckman-type two-step estimation procedure that deals with the possible endogeneity problem in the econometric models. Our results show a significant decline in long-run growth rates that is not associated with the detrimental effects of the Great Recession, and that the rate of growth of technical progress appears to be behind the slowdown in long-run GDP growth. JEL Classification: O41, O47, C15, C32.

Suggested Citation

  • Mengheng Li & Ivan Mendieta-Muñoz, 2019. "Are long-run output growth rates falling?," Working Papers 2019.07, International Network for Economic Research - INFER.
    • Handle: RePEc:inf:wpaper:2019.07
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    Cited by:

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    2. Marcio Santetti, 2023. "A time-varying finance-led model for U.S. business cycles," Papers 2310.05153, arXiv.org, revised Jan 2024.
    3. Mengheng Li & Irma Hindrayanto, 2018. "Looking for the stars: Estimating the natural rate of interest," Working Paper Series 51, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    4. David Kiefer & Ivan Mendieta-Muñoz & Codrina Rada & Rudiger von Arnim, 2020. "Secular Stagnation and Income Distribution Dynamics," Review of Radical Political Economics, Union for Radical Political Economics, vol. 52(2), pages 189-207, June.
    5. Felipe, Jesus & Estrada, Gemma & Lanzafame, Matteo, 2022. "The turnaround in Philippine growth: From disappointment to promising success," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 327-342.
    6. Stamegna, Marco, 2022. "Induced innovation, the distributive cycle, and the changing pattern of labour productivity cyclicality: a SVAR analysis for the US economy," MPRA Paper 113855, University Library of Munich, Germany.

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    More about this item

    Keywords

    Secular stagnation; long-run output growth rates; long-run technical progress growth rates; time-varying parameter models with stochastic volatility; Heckman two-step bias correction;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • O - Economic Development, Innovation, Technological Change, and Growth

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