Potential Consequences on the Economy of Low or No Growth - Short and Long Term Perspectives

Despite the fact that future GDP growth is increasingly uncertain there are few analyses of effects of low or zero growth and even fewer analyses of how this could be managed. This study provides an overview of potential consequences on the economy of low or no economic growth as identified by researchers from different branches of economics. Conclusions are based on models and experiences from individual countries or shorter time spans of economic depressions.

Potential consequences are identified concerning, e.g., labor markets, financial markets, individual businesses and the public sector. Short term effects are sometimes dramatic as evident from experienced economic depressions. However, in the longer term the effects may be less dramatic but may require substantial adjustments to a new normal.

Our results are far from conclusive since there are very few experiences of a long-term slowdown of economic growth on a national scale and no experience similar to a potential transition from a high to a low growth path on a global scale. The risk of long term low economic growth motivates research on effects and especially on how to handle a potential transition to low or no growth in order to avoid stronger than necessary effects.

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Last updated: 2021-06-24

IVL Swedish Environmental Research Institute

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