Modern Economic Growth and Recent Stagnation

Scott L. Baier, Gerald P. Dwyer Jr., and Robert Tamura
Economic Review, Vol. 88, No. 3, 2003

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During the past 200 years, most countries have entered a period of modern economic growth—consistent increases in output, input, and productivity per worker that were rare in previous centuries. Even so, a few regions of the world have experienced stagnant or falling living standards in recent years, which some have interpreted as typical of modern economic growth in the last two centuries.

Using data for most countries in the world since the 1800s and early 1900s, the authors find that (1) economic growth has improved the lives of people all around the world compared to those of their ancestors and (2) the economic stagnation or decline in some parts of the world in recent decades is unusual in the broader context of the history of the world since 1800.

The authors find that economic growth had become nearly global by the 1950s, and the recent economic declines in four regions in recent decades are atypical. Decreases in income and productivity are likely to be transitory in Central and Eastern Europe but may be longer lasting in the Middle East and Latin America. While modern economic growth may never have begun in Sub-Saharan Africa, government policies in that region have done more to throttle economic growth than to encourage it.

September 2003