The great wars, the great crash, and steady state growth: Some new evidence about an old stylized fact

The 'stylized fact' that growth rates remain constant over the long run was a fundamental feature of postwar growth theory. Using recently developed tests for structural change in univariate time series, we determine whether, and when, a break in growth rates exists for 16 countries. We find that most countries exhibited fairly steady growth for a period lasting several decades, terminated by a significant, and sudden, drop in GDP levels. Following the break, per capita output in most countries continued to grow at roughly double their prebreak rates for many decades, even after their original growth path had been surpassed.