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An Alternative Use of the Verdoorn Law at the Portuguese NUTs II Level

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  • Vitor Joao Pereira Domingues Martinho

Abstract

With this study we want to test the validity of the well known "Verdoorn's Law" which considers the relationship between the growth of productivity and output in the case of the Portuguese economy at a regional and sectoral levels (NUTs II) for the period 1995-1999. The importance of some additional variables in the original specification of Verdoorn's Law is also tested, such as, trade flows, capital accumulation and labour concentration. The main objective of the study is to confirm the presence of economies to scale that characterise the polarisation process with cumulative causation properties, explaining regional divergence. By introducing new variables to the original specification of Verdoorn's Law we intend to examine how the economies to scale are influenced by the consideration of factors related to the Polarisation (Keynensian tradition) and Agglomeration (spatial economics tradition) phenomena. The results obtained from the regression analysis based on panel estimation show that the original specification of Verdoorn's Law is more robust and confirm the presence of increasing economies to scale at both, regional and sectoral levels. However, the additional variables related to trade flows, capital accumulation and labour concentration have few influence on the performance of economies to scale (1)(Martinho, 2011).

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Paper provided by arXiv.org in its series Papers with number 1110.5548.

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Date of creation: Oct 2011
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Handle: RePEc:arx:papers:1110.5548

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  1. Martinho, Vítor João Pereira Domingues, 2011. "An alternative use of the Verdoorn law at the Portuguese nuts II level," MPRA Paper 32189, University Library of Munich, Germany.
  2. Elias Soukiazis & Vitor Martinho, 2005. "Economias à Escala e Endogeneidade dos Factores Produtivos. Análise regional e sectorial ao nível das NUTs II portuguesas," Notas Económicas, Faculdade de Economia, Universidade de Coimbra, issue 22, pages 23-50, December.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July.
  5. Miguel A. Leon-Ledesma, 1998. "Economic Growth and Verdoorn's Law in the Spanish Regions, 1962-1991," Studies in Economics 9801, Department of Economics, University of Kent.
  6. Rowthorn, R E, 1979. "A Note on Verdoorn's Law," Economic Journal, Royal Economic Society, vol. 89(353), pages 131-33, March.
  7. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-48, November.
  8. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
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Cited by:
  1. Martinho, Vítor João Pereira Domingues, 2012. "What the Keynesian theory said about Portugal?," EconStor Preprints 59007, ZBW - German National Library of Economics.
  2. Martinho, Vítor João Pereira Domingues, 2011. "Application of Keynesian and convergence theories in Portugal. Differences and similarities," MPRA Paper 32910, University Library of Munich, Germany.
  3. Martinho, Vítor João Pereira Domingues, 2011. "An alternative use of the Verdoorn law at the Portuguese nuts II level," MPRA Paper 32189, University Library of Munich, Germany.

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