Analysis of variability and correlation in long-term economic growth rates

Joint Program Reprint • Journal Article
Analysis of variability and correlation in long-term economic growth rates
Webster, M.D., and C.-H. Cho (2006)
Energy Economics, 28(5-6): 653-666

Reprint 2006-7 [Read Full Article]

Abstract/Summary:

Quantifying the uncertainty in future climate change is an important input into policy decisions. Two important sources of uncertainty are economic growth and technological change, which in turn contribute to uncertainty in future emissions. In this paper, we focus on uncertainty in one type of technical change: productivity growth. Estimates of uncertainty in future growth must necessarily include expert judgment, since the future will not necessarily look like the past. But previous uncertainty studies have taken expert judgments based on annual national growth rates, and applied them to models with regional aggregations and multi-year time steps, and often have made crude assumptions about the correlation between regions. This paper analyzes data on the variability and covariability of historical economic productivity growth rates, and investigates the effect of spatial and temporal aggregation on variance. The results are intended to inform participants in expert elicitation exercises on future economic growth uncertainty. © 2006 Elsevier

Citation:

Webster, M.D., and C.-H. Cho (2006): Analysis of variability and correlation in long-term economic growth rates. Energy Economics, 28(5-6): 653-666 (http://dx.doi.org/10.1016/j.eneco.2006.05.017)
  • Joint Program Reprint
  • Journal Article
Analysis of variability and correlation in long-term economic growth rates

Webster, M.D., and C.-H. Cho

2006-7
28(5-6): 653-666

Abstract/Summary: 

Quantifying the uncertainty in future climate change is an important input into policy decisions. Two important sources of uncertainty are economic growth and technological change, which in turn contribute to uncertainty in future emissions. In this paper, we focus on uncertainty in one type of technical change: productivity growth. Estimates of uncertainty in future growth must necessarily include expert judgment, since the future will not necessarily look like the past. But previous uncertainty studies have taken expert judgments based on annual national growth rates, and applied them to models with regional aggregations and multi-year time steps, and often have made crude assumptions about the correlation between regions. This paper analyzes data on the variability and covariability of historical economic productivity growth rates, and investigates the effect of spatial and temporal aggregation on variance. The results are intended to inform participants in expert elicitation exercises on future economic growth uncertainty. © 2006 Elsevier