Growth rate of the GDP per capita revisited. 2.GDP per capita growth rate before WWI and after WWII

 Following our previous post, we would like to refresh the overall data characteristics with the new set of MPD data (we use only the MPD data now as having the highest accuracy). The most developed countries have a privilege of the GDP time series reconstructed into the past despite the GDP concept was introduced in the first part of the 1900s and this concept is still under development. Such GDP reconstructions are a little bit fictitious and usually represent almost linear time growth without larger disturbances well observed in the 20s century.  Figure 1 presents GDPpc curves for two countries – Austria (AUT) and the USA for the period between 1870 and 2018. There are two distinct periods of quasi-linear growth: before 1910 and after 1950. There is also an extended transition period between the linear growth periods – the turbulence is associated with two World Wars (1913 to 1939) and the Great Recession (1929).

 

Figure 2 depicts the GPPpc growth in the USA and Austria with the slope estimates in both time periods made separately.  Between 1870 and 1929, the growth rate in the USA was around $117 (2011 prices) per year. For Austria, it was only $35.4, and the gap with the USA had been increasing fast. After WWII, the growth rate in the USA jumped to $622 (by a factor of 5.3). In Austria, the increase was even larger – to $585 or by a factor of 16.5! Therefore, the gap between the USA and Austria has been increasing at a slower speed compared to the 19s century. 

We trust the MPD data for the period after 1950 and suggest that they are more or less accurate and represent actual economic growth in both countries. This assumption is necessary when one analyses data and compares observations with model predictions.  Our model is simple – the growth in real GDPpc is fully described by a linear function of time and the annual increment is constant with possible fluctuations around the average level. For the USA, the growth rate is $622 per year between 1950 and 2019. For Austria, the growth rate for the same period was $585 per year.

Figure 1. GDPpc time series for Austria (AUT) and the USA. There are two distinct periods of linear growth separated by turbulent economic history between 1913 and 1950. The time series in the 19s century might be just a crude linear approximation of actually highly fluctuating data.  

Figure 2. The growth rate in the USA was around $117 (2011 prices) per year between 1870 and 1929. For Austria, it was only $35.4. After WWII, the growth rate jumped to $622 (by a factor of 5.3). In Austria, the increase was even larger – to $585 or by a factor of 16.5!