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Neoclassical versus Kaldorian Explanations of Southern Europe’s Productivity Slowdown


  • Alberto Bagnai

    () (Department of Economics, Università ʻGabriele dʼAnnunzioʼ, Pescara, Italy)

  • Christian Alexander Mongeau Ospina

    () (Department of Economics, Università ʻGabriele dʼAnnunzioʼ, Pescara, Italy
    Italian Association for the Study of Economic Asymmetries)


The productivity slowdown in European countries is among the major stylised facts of the last two decades. Several explanations have been proposed: some focus on demand-side effects, working through Kaldor’s second law of economic growth (also known as Verdoorn’s law), others on supply- side effects determined by a misallocation of the factors of production, caused either by labour market reforms or by perverse effects of financial integration (in Europe, related to the adoption of the euro). The latter explanation is put forward by some recent studies that stress how low interest rates brought about by the monetary union may have lowered productivity by inducing capital misallocation. The aim of this paper is to investigate the robustness of the latter empirical findings and to compare them with the alternative explanation offered by the post-Keynesian growth model, which instead emphasises the relation between foreign trade and productivity, along lines that go back to Adam Smith. To do so, we use a panel of industry-level data extracted from the EU KLEMS database, comparing these alternative explanations by panel cointegration techniques. The results shed some light on the role played by the single currency in the structural divergences among euro area member countries.

Suggested Citation

  • Alberto Bagnai & Christian Alexander Mongeau Ospina, 2017. "Neoclassical versus Kaldorian Explanations of Southern Europe’s Productivity Slowdown," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 67(supplemen), pages 113-135, August.
  • Handle: RePEc:aka:aoecon:v:67:y:2017:i:supplement1:p:113-135 Note: We thank the participants of the conference for their comments and Pasquale Tridico for his useful suggestions.

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    References listed on IDEAS

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    Blog mentions

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    1. Il saccheggio del Made in Italy
      by Alberto Bagnai in Goofynomics on 2018-01-07 18:33:00

    More about this item


    firm behaviour; productivity; post-Keynesian model; economic integration; foreign exchange;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange


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