Recent great depressions: Aggregate growth in New Zealand and Switzerland, 1973-2000

Throughout the 1950s and 60s real GDP per working-age person in New Zealand and Switzerland grew at rates at or above the 2 percent trend growth rate of the United States. Between 1973 and 2000, however, real GDP per working-age person in both countries has fallen a cumulative 30 percent below the trend growth path. Our growth accounting attributes almost all of the changes in output growth to changes in the growth of total factor productivity (TFP), and not to changes in labor or capital accumulation. A calibrated dynamic general equilibrium model that takes TFP as exogenous can explain almost the entire decline in relative output in both New Zealand and Switzerland. To understand the recent growth experiences in New Zealand and Switzerland, it is necessary to understand why TFP growth rates have fallen so much.