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Neoclassical versus Kaldorian Explanations of Southern Europe’s Productivity Slowdown

Listed author(s):
  • 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.

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File URL: http://www.akademiai.com/doi/pdf/10.1556/032.2017.67.S.9
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Article provided by Akadémiai Kiadó, Hungary in its journal Acta Oeconomica.

Volume (Year): 67 (2017)
Issue (Month): supplement1 (August)
Pages: 113-135

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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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