Uncertainty in forecasts of long-run economic growth

Proc Natl Acad Sci U S A. 2018 May 22;115(21):5409-5414. doi: 10.1073/pnas.1713628115. Epub 2018 May 14.

Abstract

Forecasts of long-run economic growth are critical inputs into policy decisions being made today on the economy and the environment. Despite its importance, there is a sparse literature on long-run forecasts of economic growth and the uncertainty in such forecasts. This study presents comprehensive probabilistic long-run projections of global and regional per-capita economic growth rates, comparing estimates from an expert survey and a low-frequency econometric approach. Our primary results suggest a median 2010-2100 global growth rate in per-capita gross domestic product of 2.1% per year, with a standard deviation (SD) of 1.1 percentage points, indicating substantially higher uncertainty than is implied in existing forecasts. The larger range of growth rates implies a greater likelihood of extreme climate change outcomes than is currently assumed and has important implications for social insurance programs in the United States.

Keywords: climate change; economic productivity; forecast uncertainty; greenhouse gas emissions; long-run growth.

Publication types

  • Research Support, Non-U.S. Gov't
  • Research Support, U.S. Gov't, Non-P.H.S.