Data 2 – Growth and recessions
Charts and maps that explore economic growth. Each of the visualisations below are interactive – hover over them to reveal more detail to dig deeper.
Recent trends in global growth
How are the world’s most populous countries performing? The chart below plots their growth in GDP per capita between 2022 and 2023, using the most recent GDP estimates. Slide the selector to adjust the starting year. How have countries growth rates changed over time?
The growth paths have mostly been an upward trajectory, but not all countries have seen such consistency.
Mapping recent growth across the US
As with global grwoth, the economic expansion of individual US States is not always constant or evenly distributed: the vast size of the United States means that large parts of the US can be in recessions, while the country’s overall GDP still increases. Importantly, within the US, the states have the power to make their own economic policies: from taxation to spending to minimum wages. This can mean their economies perform differently depending on the macroeconomic climate. We will learn more about these policies, and the results of policy experimentationin the US, as we progress through the course.
Can growth go on forever?
When we step back and use a wide angle lens we see that economic growth is relatively new. Estimates across the last millennium for a combined global GDP show very little growth before the 1700s, contrasted with rapid growth in the last century. This leads us to a big question, that many economists grapple with: if there was little growth in the past, will growth go on forever?
Where does growth come from?
GDP is a measure of output for an economy, so for countries to become more prosperous, they must want to increase output, or productiveness relative to their population. Per worker output, aka productivity, in the US has almost tripled since the 1960s, even after adjusting for price increases.
Productivity in the US has been on a strong positive trend since the 1980s, especially when compared to some other major economies, such as Japan and the major European states. Italy’s pandemic dip in 2020 took it nearly back to the same level as in 1990. We can see here that economic growth is not a guarantee.
How can we increase growth?
Research and development–deploying funds to invest in news ideas–can be an important determinant of economic growth. Wealthier countries often dedicate a larger portion of their GDP towards R&D, however for some countries this is far more of a priority. The spend on R&D as a proportion of GDP is twice as high in the US as in the UK, for example: could this explain some of the UK’s poor recent productivity growth?
Patent applications can be an interesting proxy for a country’s technological innovation and we observe a strong positive correlation between the number of applications and a country’s per person GDP.
Human capital describes the skills, experience, and knowledge held by a person or population and is an important determinant in the amount of economic output. The Human Capital Index plotted in this chart shows the impact that sub-optimal education and health has on a country’s GDP. Populations with higher levels of Human capital can engage in more complex forms of production, are better able to increase the efficiency of existing systems and are better equipped to challenge corruption that is deleterious to long run growth.
What happens when growth dissapears?
Countries can experience short-term reductions in growth in the form of recessions. With lower spending by households, and investment by firms the demand for workers typically falls. The chart below shows shaded recessions: notice how unemployment spikes with major recessions. In the next chapter we learn how vital employment is, the costs of unemployment, and about the link between the labor market and prices, all topics where Chicago’s economists have made landmark contributions.