Economic resilience:Measurement and assessment across time and space

Abstract

This paper studies economic resilience as the ability of an economic system to respond to adverse shocks. We propose several measures of resilience based on a quantile function representing income dynamics. Applied to the evolution of per capita income, we evaluate the speed and nature of economic adjustments to adverse shocks across countries over the last two centuries. We find evidence of important income effects: low-income countries adjust to adverse shocks better in the short run; but high-income countries adjust better in the longer run. We show that the long run effects dominate: in terms of discounted present value, high-income countries have been able to reduce the effects of adverse shocks on expected future income better than low-income countries. Finally, we find that, over the last 50 years, most of the changes in resilience across countries can be attributed to income effects.