Macro Plots

U.S. Real GDP/Capita 1950-2004 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

U.S. ln(Real GDP/capita) 1950-2004 10.6 10.4 10.2 10.0 9.8

g(t) = ln(Y(t)) - ln(Y(t-1))

9.6 9.4 9.2

ln(Y(t)) = ln(Y(0))+tg(t) = 9.28 + .022t … if g is constant

9.0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 ln(GDP_r/pc)

1

Natural logs and Growth GDPt GDPt 1 g (t )  ln(GDPt ) ln(GDPt 1 ) GDPt 1 ln(GDPt ) ln(GDP0 ) g (t ) ln(GDP0 ) t g if growth is constant t

a b t a linear function in t , slope b growth U.S. ln(Real GDP/capita) 1950-2004 10.6 10.4 10.2 10.0 9.8

g(t) = ln(Y(t)) - ln(Y(t-1))

9.6 ln(Y(t)) = ln(Y(0))+tg(t) = 9.28 + .022t … if g is constant

9.4 9.2 9.0

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 ln(GDP_r/pc)

U.S. ln(Real GDP/capita) 1970-1986 10.2 10.1 10.1 10.0 10.0 9.9 9.9 9.8 9.8 9.7 1970

1975

1980

1985 ln(GDP_r/pc)

2

U.S. Real Business Cycles 1950-2004 De-trended Real GDP/capita: GRP - Trend (assumes constant growth) 0.10 0.08

1973

0.06 1985

1953

0.04

2001

0.02 0.00 -0.02 -0.04 -0.06 -0.08 -0.10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

U.S. Real GDP Growth 1950-2004 (assumes constant growth)

8% 6% 4% 1985

2% 0% 2001

-2% 1973

-4%

1953

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

3

OECD ln(Real GDP/capita) Chained (2000) Dollars 10.5 10.0

US

9.5 9.0

Canada

Japan

Belgium g = .027

Belgium 8.5

Mexico

Canada g = .021 France g = .027

8.0 7.5 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Japan g = .045 Mexico g = .0198 US g = .022

OECD Real GDP Growth 15%

10%

5%

0% g_Belg -5%

g_Can g_Fra

-10% 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001

g_Japan g_US

Standard of living growth is fairly constant…convergence? Takeover/recovery? Growth correlation and convergence: long run diminishment? convergence to what? Why and how “long run” growth? and is it, now, the long run?

4

Does a high standard of living lead to a high rate of growth? Real GDP/capita (chained) vs. Growth 144 countries in 1980

25% 20%

Growth

15% 10% 5% 0% -5% -10% -15% $0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Real GDP/capita

Higher investment is positively correlated with real income… Investment Share (Inv/GDP) and Real GDP/capita (chained 2000) OECD: 1950-2004 60000

Real GDP/capita

50000 40000 30000 20000 10000 0

0

10

20

30

40

50

Invesment Share

5

Gov. Share of Real GDP vs. Real GDP $30,000 Real GDP/capita

$25,000 $20,000 $15,000 $10,000 $5,000 $0 0%

10%

20%

30%

40%

50%

60%

70%

80%

Gov. Share

Gov. Share of Real GDP vs. Real GDP Growth 20% 15% Growth

10% 5% 0% -5% -10% -15% 0%

10%

20%

30%

40%

50%

60%

70%

80%

Gov. Share

Does the government crowd out private investment, output, income and growth?

6