Returns To Scale And Regional Growth: The Static-Dynamic Verdoorn Law Paradox Revisited
AbstractIt has long been an article of faith amongst regional economists that increasing returns to scale are necessary to explain the punctiform location of economic activity and population. However, there is no consensus in the empirical literature over whether returns to scale are constant or increasing. A notable example of this lack of agreement is provided by the static-dynamic Verdoorn law paradox. While the dynamic Verdoorn law (specified using growth rates) yields estimates of substantial increasing returns to scale, the static Verdoorn law (specified using log-levels) indicates only the presence of constant returns to scale. In this paper, we explain the static-dynamic Verdoorn law paradox by showing that estimates of returns to scale obtained using the static law are subject to a spatial aggregation bias, which biases the estimates towards constant returns to scale. We illustrate our arguments by means of simulation exercises. The results obtained hold general lessons for applied economic analysis using spatial data. Copyright Blackwell Publishing, Inc. 2007
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Regional Science.
Volume (Year): 47 (2007)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-4146
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Carton, Christine, 2009.
"Mecanismos kaldorianos del crecimiento regional: Aplicación empírica al caso del ALADI (1980-2007)
[Kaldorian mechanisms of regional growth: An empirical application to the case of ALADI 1980-200," MPRA Paper 15675, University Library of Munich, Germany.
- Christine Carton Madura, 2009. "Mecanismos kaldorianos del crecimiento regional: Aplicación empírica al caso del ALADI (1980-2007)," Economic Analysis Working Papers (EAWP), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 8, pages 1-24, May.
- Ofria, Ferdinando & Millemaci, Emanuele, 2010.
"Kaldor-Verdoorn’s law and increasing returns to scale: a comparison across developed countries,"
30941, University Library of Munich, Germany.
- Emanuele Millemaci & Ferdinando Ofria, 2012. "Kaldor-Verdoorn's Law and Increasing Returns to Scale: A Comparison Across Developed Countries," Working Papers 2012.92, Fondazione Eni Enrico Mattei.
- Fazio, Giorgio & Maltese, Enza & Piacentino, Davide, 2011.
"Estimating Verdoorn law for Italian firms and regions,"
35388, University Library of Munich, Germany.
- Giorgio Fazio & Enza Maltese & Davide Piacentino, 2013. "Estimating Verdoorn law for Italian firms and regions," Letters in Spatial and Resource Sciences, Springer, vol. 6(1), pages 45-54, March.
- Jesus Felipe & John McCombie, 2012. "Problems with Regional Production Functions and Estimates of Agglomeration Economies: A Caveat Emptor for Regional Scientists," Economics Working Paper Archive wp_725, Levy Economics Institute, The.
- Richard Harris, 2011.
"Models Of Regional Growth: Past, Present And Future,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 25(5), pages 913-951, December.
- Richard Harris, 2008. "Models of Regional Growth: Past, Present and Future," SERC Discussion Papers 0002, Spatial Economics Research Centre, LSE.
- Ferdinando Ofria, 2009. "L'approccio Kaldor-Verdoorn: una verifica empirica per il Centro-Nord e il Mezzogiorno d'Italia (anni 1951-2006)," Rivista di Politica Economica, SIPI Spa, issue 1, pages 179-207, January-M.
- Andrew Sharpe & Eric Thomson, 2010. "Insights into Canada’s Abysmal Post-2000 Productivity Performance from Decompositions of Labour Productivity Growth by Industry and Province," International Productivity Monitor, Centre for the Study of Living Standards, vol. 20, pages 48-67, Fall.
- Alvaro Angeriz & John McCombie & Mark Roberts, 2008. "Returns to Scale for EU Regional Manufacturing," Working Papers 20, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
- Kim, Man-Keun & Harris, Thomas R., 2008. "An Efficiency Analysis of Nevada and Utah Counties: Region Size Leads Regional Efficiency," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6338, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.