Accounting for variability in the growth rate of income

Peter J. Lambert and Shlomo Yitzhaki

Economics Letters, 2015, vol. 129, issue C, 71-73

Abstract: The average of periodic growth rates is a downwardly biased estimator of the rate of growth of a country. The higher the variance of the periodical growth rates, the higher the downward bias. The longer the business cycle, the higher the downward bias. In this short paper, we demonstrate these facts on a number of different levels, from intuitive to quite technical. We suggest that the variability of growth rates be taken into account whenever a long term forecast is prepared.

Keywords: Growth rate; Individual incomes; Gross national product (search for similar items in EconPapers)
JEL-codes: B41 E37 O47 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:129:y:2015:i:c:p:71-73

DOI: 10.1016/j.econlet.2015.02.005

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