- Potential labor supply is estimated as the population-weighted aggregate of predicted values of age- and gender-specific labor force participation rates from regressions on policy outcomes and cohort characteristics, business cycles, and country effects.

- Potential TFP growth is estimated as the predicted value of a parsimonious panel regression of five-year averages of trend TFP growth on lagged per capita income relative to the advanced-economy average (to proxy convergence-related productivity catchup), education and demographic indicators, and trend investment.

These production function estimates are also contextualized with estimates derived by several other techniques, including univariate and multivariate filters, and long-term growth forecasts from Consensus Economics, and the IMF’s World Economic Outlook database. More detail regarding these estimation approaches and their relative pros and cons can also be found in Kilic Celik, Kose, Ohnsorge, and Ruch (2023).

In addition to analyzing the recent history and prospects for potential growth in EMDEs, the paper estimates the impacts of several illustrative policy reform scenarios, and of more frequent climate-related disasters, on potential growth. The parameters of these scenarios are summarized below, with more detail on their construction available in Kilic Celik, Kose, and Ohnsorge (2023).

An upside scenario is presented wherein investment growth in each economy is assumed to rise over the course of 2022-30 by the most that it increased in any ten-year period during 2000-21. Educational outcome indicators—secondary and tertiary enrollment and completion rates—are also assumed to rise in each country by the largest improvement seen in any ten-year period during 2000-21, except that enrollment rates are capped at 100 percent and completion rates are capped at the highest levels observed in advanced economies in 2019, the latest available data point. Life expectancy is assumed to rise in each country by the largest increase in any ten-year period during 2000-21, but not above the median advanced-economy life expectancy in 2019. In addition, for each age group in each country, the female labor force participation rate is assumed to rise by the largest increase over any ten-year period during 2000-2021, but not to exceed the male labor force participation rate in the same age group. Separately, a social benefit reform with labor market implications is modelled. For each gender and each country, labor force participation rates for workers in age groups 55-59, 60-64, and 65 years or older are assumed to rise to the participation rates of age groups that are five years younger, i.e., those of age groups 50-54, 55-59, and 60-64 years, respectively. The increase is assumed to occur gradually over 20 years for each gender in each country.

The estimation of the damage to potential growth from more frequent climate-related disasters is based on Dieppe, Kilic Celik, and Okou (2020). It considers the effects of climate disasters on TFP growth in EMDEs. The disasters scenario in this paper assumes that the number of climate disasters in 2022-30 will be higher than in 2011-21 in each country by the same amount as the increase between 2000-10 and 2011-21, then scales