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Long-term growth and productivity projections in advanced countries

Listed author(s):
  • G. Cette
  • R. Lecat
  • C. Ly-Marin

In this period of high uncertainty about future economic growth, we have developed a growth projection tool for 13 advanced countries and the euro area at the 2100 horizon. This high uncertainty is reflected in the debate on the possibility of a ‘secular stagnation’, fuelled by the short-lived Information and Communication Technology (ICT) shock and the current low productivity and GDP growth in advanced countries. Our projection tool allows for the modelling of technology shocks, for different speeds of regulation and education convergence, with endogenous capital growth and TFP convergence processes. We illustrate the benefits of this tool through four growth scenarios, crossing the cases of a new technology shock or secular stagnation with those of regulation and education convergence or of absence of reforms. Over the 2015-2100 period, the secular stagnation scenario assumes yearly TFP growth of 0.6% in the US, leading to a 1.5% GDP growth trend. The technology shock scenario assumes that the third technological revolution will, in the US, provide similar TFP gains to electricity during the second industrial revolution, leading to a 1.4% TFP trend, to which we add a TFP growth wave peaking in 2040, and thus to an average GDP growth rate of 3% in the US. In non-US countries, GDP growth will depend on the implementation of regulation reforms, the increase in education and on the distance to the country-specific convergence target, namely the US, as well. Over the period 2015-2060, for the euro area, Japan and the United Kingdom, benefits from regulation and education convergence would amount to a 0.1 to 0.4 pp yearly growth rate depending on the initial degree both of rigidity and the TFP distance to the US.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/document-de-travail-617_2016-12.pdf
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Paper provided by Banque de France in its series Working papers with number 617.

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Length: 29 pages
Date of creation: 2017
Handle: RePEc:bfr:banfra:617
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Web page: http://www.banque-france.fr/

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  1. David M. Byrne & John G. Fernald & Marshall B. Reinsdorf, 2016. "Does the United States Have a Productivity Slowdown or a Measurement Problem?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 109-182.
  2. Aghion, Philippe & Askenazy, Philippe & Bourlès, Renaud & Cette, Gilbert & Dromel, Nicolas, 2009. "Education, market rigidities and growth," Economics Letters, Elsevier, vol. 102(1), pages 62-65, January.
  3. Gilbert Cette & Jimmy Lopez & Jacques Mairesse, 2013. "Upstream Product Market Regulations, ICT, R&D and Productivity," Working Papers 2013-37, Centre de Recherche en Economie et Statistique.
  4. A. Bergeaud & G. Cette & R. Lecat, 2016. "The role of production factor quality and technology diffusion in 20th century productivity growth," Working papers 588, Banque de France.
  5. Crafts, Nicholas & O’Rourke Hjortshøj, Kevin, 2013. "Twentieth Century Growth," CAGE Online Working Paper Series 153, Competitive Advantage in the Global Economy (CAGE).
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  20. Cette, Gilbert & Mairesse, Jacques & Kocoglu, Yusuf, 2005. "ICT diffusion and potential output growth," Economics Letters, Elsevier, vol. 87(2), pages 231-234, May.
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