49
7
growth rate of GDP per capita (left axis, dark line) and the growth rate of GDP (right axis, light line).
The results indicate that there is indeed a great variability in the ‘trend’ growth rates for these 17
countries over time. Most evidently, the two world wars cause violent interruptions of trends. For
many countries (Australia, Austria, Belgium, Germany
5
, Japan, New Zealand, Switzerland, United
Kingdom and United States), the start of the twentieth century is a period of high growth. The early
1910s signify radical breaks, usually with rapidly falling trend growth rates. With the two wars, the
roaring twenties and the Great Depression in the 1930s, the next 35 years are turbulent, with no clear
steady state settling in.
After 1950, the European countries show a common pattern of rapidly increasing trend growth
rates. Australia and Japan also show this pattern. In most cases, this strong increase of the trend brings
the countries involved on a path with growth rates that are higher than ever experienced before in the
twentieth century. This is very clearly the case for France, Italy, Japan, Spain and Sweden.
The 1970s bring the well-documented break with the golden age of the 1950s and 1960s. In most
countries, trend growth settle down at a relatively constant level (Canada, Denmark, New Zealand and
Switzerland are the main exceptions). It is notable, however, that compared to the end of the golden
age, the trend growth rates in most countries are at a similar or just slightly lower level. What is
different in the 1970s and 1980s as compared to the previous period is that the trend growth rates no
longer increase.
The 1990s show some ripples in many countries. Obviously, compared to the time span of the
graph, this period is rather short for any firm judgement about possible reversions of the trend. What is
interesting, however, is the fact that the estimated trends vary greatly between countries. On the one
hand, Germany, Italy and Japan seem to experience a decrease in the trend. Denmark, Finland,
Norway, the United Kingdom and the United States, on the other hand, seem to show signs of an
increase of trend growth.
OECD (2000) investigates changes in the trend rate of growth between the 1980s and the 1990s.
The method used in that paper is to compare the rate of growth 1980-1990 to that of 1990-1998. Based
on the difference in growth between these two periods, three groups of countries are distinguished
(increasing growth, equal growth, decreasing growth). The general finding of that analysis is that there
are indeed large differences between countries, with a substantial number of countries in each of the
groups. Ireland, Netherlands, Norway, Australia, Denmark and the United States emerge as countries
with increasing growth. Comparing this to the results obtained here, one sees some interesting
similarities and differences. For Australia, the present analysis confirms increasing growth (for GDP
per capita), but seen in a longer historical perspective, this is a process that follows quite smoothly
from the past. The upswing in growth in the Netherlands, Norway and the United States seems more
fragile in the present analysis than in the OECD analysis. On the other hand, the present analysis
seems to indicate increasing growth rates in Finland and the United Kingdom (both classified as
falling growth in the OECD analysis).
In summary, the Kalman filter estimations seem to show that the concept of steady state growth is
not very useful from an empirical point of view. Growth paths of countries show a high degree of
variability over time. Periods of rapid and slow(er) growth take turns, without, however, a clear
cyclical pattern with fixed periodicity. There are some features of historical growth patterns that seem
to be shared by most countries: generally erratic patterns of trend growth before 1940, a long period of
increasing trend growth rates after the second world war, and slowdown of growth from the mid-
1970s. Despite these common patterns, there are important differences between countries with respect
5
The picture refers to West Germany only.
