Real Income Stagnation of Countries 1960–2001

Abstract

This paper examines the phenomenon of real-income stagnation (in which real-income growth is uninterruptedly negligible or negative for a sizable sequence of years). We analyse data for four decades from a large cross-section of countries. Real income stagnation is a conceptually distinct phenomenon from low average growth and other features of the growth sequence that have been previously considered. We find that real income stagnation has affected a significant number of countries (103 out of 168), and resulted in substantial income loss. Countries that suffered spells of real income stagnation were more likely to be poor, in Latin America or sub-Saharan Africa, conflict ridden and dependent on primary commodity exports. Stagnation is also very likely to persist over time. Countries that were afflicted with stagnation in the 1960s had a likelihood of 75 per cent of also being afflicted with stagnation in the 1990s.