Real economic growth. The importance of being … small

Here, we compare real economic growth based on real GDP per capita, G. In developed countries, annual increment of GDP per capita is constant over time with all fluctuations caused by the change in the age pyramid. The average value of the annual increment of GDP per capita varies between countries, however. Among large economies, the USA grows with the highest annual increment.  In that sense, it is the most efficient economy.

Lately, we presented several posts showing the difference between real GDP per capita in the USA, Gusa,  and select countries, Gi:

dG = Gusa-Gi

When the difference dG has a positive trend, the gap with the USA increase with time. When dG has a negative trend, this country grows faster than the USA. There are not many economies outperforming the U.S. since 1990. Six developed countries deserve special consideration: Ireland, Norway, Luxembourg, Hong Kong, Singapore, and Trinidad and Tobago which joined recently.  Figure 1 demonstrates that these six economies all have negative trend in the dG time series. Ireland, the biggest among them, has been experiencing problems since 2006.

Hence, one can conclude that small countries have higher probability to grow fast. To be small is not enough, however!  

Figure 1. The differences between real GDP per capita in the USA and six select countries

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