Global evidence on the distribution of GDP growth rates

Abstract

We study the size distribution of changes in the gross domestic product (GDP) of 167 countries for the period 1950–2011. A consensus has developed in the literature that the distribution of GDP growth rates can be approximated by the Laplace distribution in the central part and power-law distributions in the tails. Using a richer database than prior studies and testing for more theoretical distributions, we find that the distribution of GDP growth rates can be fitted using the heavy-tailed Cauchy distribution for almost all countries. Significantly, this same finding recently has been demonstrated for (1) the distribution of firm growth rates and (2) the distribution of firm economic profit rates. Together, these three findings suggest the possibility that there exist universal mechanisms that give rise to general laws governing the growth dynamics of firms and economies.