A fascinating new paper:
Reconstruction Dynamics: The Impact of World War II on Post-War
Economic Growth
By Petros Milionis and Tamás Vonyóy; August 2015
Abstract
The decades that followed the end
of World War II are commonly referred to as the golden age of economic growth as
they were marked by the highest growth rates that the world economy has witnessed to
this date. This temporal sequence raises the natural question of whether and to
what extent these growth rates were the outcome of a prolonged reconstruction process that began
after the end of the war. We revisit this important question by investigating the
impact of the post-war output gap on the subsequent growth experiences of different
countries in different regions of the world and by using a novel instrumental variables approach
to establish causality. Our results show that this reconstruction process was
an important driver of growth during the post-war decades, not only in Europe but globally, and its
impact on growth rates lasted until the mid 1970s. Moreover, a counterfactual analysis
suggests that in the absence of the reconstruction effect global growth rates from 1950 to
1975 would have been on average 40% lower and only slightly higher than those
observed during the years from 1975 to 2000.