Long-run growth scenarios for the world economy

Abstract: This paper develops and applies a simple “conditional growth” framework to make long-term GDP projections for the world economy, taking as a starting point the recent empirical evidence about the drivers of existing cross-country income disparities. Human capital is projected by cohorts, and allowance is implicitly made for the impact of ageing and potential labour market and pension reforms on employment growth. Leaving aside deeper sources of uncertainty such as model and parameter uncertainty, projections are found to be sensitive to future economic policies in the areas of education, pensions, labour markets and climate change mitigation, and even more so to total factor productivity and population trends. A baseline scenario projects fairly stable world GDP growth of about 3.5% annually on average (in PPP terms) over 2005–2050. [Copyright &y& Elsevier]