The history of GDP growth: between Luxembourg and Cyprus

One of interesting consequences of the finding discussed in the previous post is that the gap in GDP per capita between developed countries should be constant or a linear function of time. The former case is possible only when two mean annual increments are equal. When two countries are characterized by different mean annual increments, the gap between their GDP per capita will be growing linearly.

Using the Conference Board Total Economic Database we have estimated the evolution of real GDP per capita in European countries relative to that in the US. In other words, we have calculated differences between countries and the US:

Gus(t)-Gi(t)

, where i runs between Austria and the UK.  GDP is measured in 2010 US dollars at EKS PPPs.

Figure 1 depicts all obtained differences. Luxemburg and Ireland have been growing faster than the US since 1989.  The fastest growing country is Luxembourg according to the Conference Board. Several countries show poor results. Amongst them are Cyprus, Portugal, Italy and Switzerland. Other countries have been slightly lagging behind the US after 1989, except Norway.  Nevertheless, almost all differences are very close to linear functions of time.

The gap in real GDP per capita between these countries and the US is likely forever.

Figure 1. Differences between the US GDP per capita and those in European countries.