Subdued Potential Growth: Sources and Remedies

37 Pages Posted: 25 Mar 2020 Last revised: 6 May 2020

See all articles by Sinem Kilic Celik

Sinem Kilic Celik

World Bank

M. Ayhan Kose

World Bank; Brookings Institution; Centre for Economic Policy Research (CEPR); Australian National University (ANU)

Franziska Ohnsorge

World Bank

Multiple version iconThere are 3 versions of this paper

Date Written: March 2020

Abstract

Global potential output growth has been flagging. At 2.5 percent in 2013-17, post-crisis potential growth is 0.5 percentage point below its longer-term average and 0.9 percentage point below its average a decade ago. Compared with a decade ago, potential growth has declined 0.8 percentage point in advanced economies and 1.1 percentage point in emerging market and developing economies. The slowdown mainly reflected weaker capital accumulation but is also evidence of decelerating productivity growth and demographic trends that dampen labor supply growth. Unless countered, these forces are expected to continue and to depress global potential growth further by 0.2 percentage point over the next decade. A menu of policy options is available to help reverse this trend, including comprehensive policy initiatives to lift physical and human capital and to encourage labor force participation by women and older workers.

Keywords: Advanced economies, emerging market and developing economies, Potential growth, Potential Output

JEL Classification: E20, O40, O47

Suggested Citation

Kilic Celik, Sinem and Kose, M. Ayhan and Ohnsorge, Franziska, Subdued Potential Growth: Sources and Remedies (March 2020). CEPR Discussion Paper No. DP14527, Available at SSRN: https://ssrn.com/abstract=3560335

Sinem Kilic Celik (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

M. Ayhan Kose

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

Franziska Ohnsorge

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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