2  Lawrence H. Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,” Business Economics, Vol. 49, No. 2, 2014; Coen Teulings and Richard Baldwin, Secular Stagnation: Facts, Causes and Cures, A VoxEu.org Book, CEPR Press, 2014. 3  Lant Pritchett and Lawrence H. Summers, “Asiaphoria Meets Regression to the Mean,” NBER Working Paper 20573, 2014. BIS central bankers’ speeches  1  The second stylized fact is the large degree of heterogeneity, or diversity in plain English, in the level of per capita GDP. As illustrated in Chart 2, the Asian NIEs (Hong Kong SAR, Singapore, Taiwan and Korea) and Japan enjoy very high levels of income, whereas most Asian countries – and in fact most of the population of Asia – belong to the middle-income group. 4 Even within the middle-income group, individual countries differ considerably in their levels of per capita GDP. Economists studying economic growth rely primarily on estimates of GDP, but they sometimes check these statistics against data from other sources. One simple and visually impressive yardstick of economic prosperity is the amount of artificial light that can be seen at night from space. 5 Chart 3 shows such an image for Asia. This not only confirms the aforementioned heterogeneity across Asian countries, but also shows the heterogeneity within a country. For instance, coastal China is as bright as Korea and Japan, but light becomes sparse as you move inland.
Population aging implies a continued decline in the proportion of the working-age population, which in turn poses a challenge to sustaining per-capita income growth, as a given income earner has to transfer a larger share of his or her income to the retirees. Chart 5 shows how diverse the region is in this context, with some countries already facing serious challenges. In this chart, the horizontal axis is changes in working-age population, and the vertical axis is the proportion of the working-age population to the total population. A rise in this proportion is often called a “demographic bonus,” while the opposite is called a “demographic onus.” And the size of the bubble is proportional to the absolute number of the working-age population. As you can see, over such a long period of time, even glacial demographic changes seem dramatic. Japan has already entered deep into the period of demographic onus, with the absolute number of the working-age population declining at a significant pace. The NIEs, China and some ASEAN countries are about to follow Japan in this regard in the not-sodistant future. Meanwhile, India and other Asian countries are expected to enjoy a favorable demographic environment at least until the middle of this century. The third challenge is what I call the “Malthusian trap.” In Malthus’ original work, the existence of a limited resource – land in his case – constrains growth. Likewise, limitations in the supply of natural resources, such as oil, are thought to threaten global growth in the longrun.