A Note On Competitiveness, Unit Labor Costs And Growth: Is "Kaldor'S Paradox" A Figment Of Interpretation?
This paper shows that unit labor costs (ulcs), the most widely used measure of competitiveness, can be interpreted as the labor share in output multiplied by a price-adjustment factor. This has three main implications. First, ulcs are not just a technical concept since they embody the social relations that affect the distribution of income between the social classes. Secondly, lower ulcs should not necessarily be interpreted as implying that an economy is more competitive, i.e., that it will grow faster, and vice-versa. In wage-led growth economies, an increase in the wage share leads to an increase in the equilibrium capacity utilization rate, which leads to an increase in the growth rate of the capital stock. Hence it is possible to find that the countries with fast-growing ulcs are the ones registering faster growth in exports or in GDP. Once one analyzes ulcs taking into account their functional distribution dimension, "Kaldor's paradox" ceases to be an anomalous result. Finally, one can define the concept of unit capital cost as a measure of competitiveness and shift the burden of lack of growth or loss of market share to capital.
|Date of creation:||Feb 2005|
|Contact details of provider:|| Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601|
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thirlwall, A P, 1972. "Changes in Industrial Composition in the UK and US and Labour's Share of National Income, 1948-1969," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 34(4), pages 373-382, November.
- Fagerberg, Jan, 1996.
"Technology and Competitiveness,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 12(3), pages 39-51, Autumn.
- Jan Fagerberg, 1996. "Technology and Competitiveness," Working Papers Archives 1996548, Centre for Technology, Innovation and Culture, University of Oslo.
- Glyn, Andrew, 1997. "Does Aggregate Profitability Really Matter?," Cambridge Journal of Economics, Oxford University Press, vol. 21(5), pages 593-619, September.
- Glyn, A, 1997. "Does Aggregate Profitability Really Matter?," Papers 17, Centre for Economic Performance & Institute of Economics.
- Goldstein, Jonathan, 1986. "Markup Variability and Flexibility: Theory and Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 59(4), pages 599-621, October.
- Sanjaya Lall, 2001. "Competitiveness, Technology and Skills," Books, Edward Elgar Publishing, number 2298.
- Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
- Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
- Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2005-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin)
If references are entirely missing, you can add them using this form.