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Kaldor-Verdoorn’s law and increasing returns to scale: a comparison across developed countries

Listed author(s):
  • Ofria, Ferdinando
  • Millemaci, Emanuele

The object of this study is to investigate the validity of the Kaldor-Verdoorn’s Law in explaining the long run determinants of the labor productivity growth for the manufacturing sector of some developed economies (Western European Countries, Australia, Canada, Japan and United States). We consider the period 1973-2006 using data provided by the European Commission - Economics and Financial Affairs. Our findings suggest that the law is valid for the manufacturing of Italy, US, Belgium and Australia. Capital growth and labor cost growth do not appear relevant in explaining productivity growth. The estimated Verdoorn coefficients are found to be stable throughout the period.

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File URL: https://mpra.ub.uni-muenchen.de/30941/1/MPRA_paper_30941.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30941.

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Date of creation: 23 Oct 2010
Handle: RePEc:pra:mprapa:30941
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  1. 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.
  2. Destefanis, Sergio, 2002. "The Verdoorn Law: Some Evidence from Non-parametric Frontier Analysis," MPRA Paper 60954, University Library of Munich, Germany.
  3. Fingleton, B & McCombie, J S L, 1998. "Increasing Returns and Economic Growth: Some Evidence for Manufacturing from the European Union Regions," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 89-105, January.
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  6. Russell Davidson & James MacKinnon, 2006. "The Case Against Jive," Departmental Working Papers 2004-02, McGill University, Department of Economics.
  7. Vaciago, Giacomo, 1975. "Increasing Returns and Growth in Advanced Economies: A Re-evaluation," Oxford Economic Papers, Oxford University Press, vol. 27(2), pages 232-239, July.
  8. Harris, Richard I D & Lau, Eunice, 1998. "Verdoorn's Law and Increasing Returns to Scale in the UK Regions, 1968-91: Some New Estimates Based on the Cointegration Approach," Oxford Economic Papers, Oxford University Press, vol. 50(2), pages 201-219, April.
  9. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
  10. McCombie, J S L & de Ridder, J R, 1984. ""The Verdoorn Law Controversy": Some New Empirical Evidence Using U.S. State Data," Oxford Economic Papers, Oxford University Press, vol. 36(2), pages 268-284, June.
  11. Romina Gambacorta, 2004. "Il dibattito sulla legge di Verdoorn: alcuni risultati empirici usando l’analisi di cointegrazione," Rivista di Politica Economica, SIPI Spa, vol. 94(3), pages 1-251, May-June.
  12. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  13. Joshua Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," NBER Working Papers 8456, National Bureau of Economic Research, Inc.
  14. Salvatore D'Acunto & Sergio Destefanis & Marco Musella, 2004. "Exports, Supply Constraints and Growth: An Investigation using Regional Data," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 167-189.
  15. Lena Vogel, 2009. "The endogeneity of the natural rate of growth - an empirical study for Latin-American countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 41-53.
  16. Stilianos Alexiadis & Dimitrios Tsagdis, 2010. "Is cumulative growth in manufacturing productivity slowing down in the EU12 regions?," Cambridge Journal of Economics, Oxford University Press, vol. 34(6), pages 1001-1017.
  17. Hausman, Jerry & Stock, James H. & Yogo, Motohiro, 2005. "Asymptotic properties of the Hahn-Hausman test for weak-instruments," Economics Letters, Elsevier, vol. 89(3), pages 333-342, December.
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  20. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  21. R. I. D. Harris & A. Liu, 1999. "Verdoorn's law and increasing returns to scale: country estimates based on the cointegration approach," Applied Economics Letters, Taylor & Francis Journals, vol. 6(1), pages 29-33.
  22. Dirk Frantzen, 2008. "Technology, competitiveness and specialisation in OECD manufacturing," Journal of Economic Studies, Emerald Group Publishing, vol. 35(1), pages 44-68, January.
  23. Fiona Tregenna, 2009. "Characterising deindustrialisation: An analysis of changes in manufacturing employment and output internationally," Cambridge Journal of Economics, Oxford University Press, vol. 33(3), pages 433-466, May.
  24. Anna Mikusheva & Brian P. Poi, 2006. "Tests and confidence sets with correct size when instruments are potentially weak," Stata Journal, StataCorp LP, vol. 6(3), pages 335-347, September.
  25. Maddison, Angus, 1979. "Per Capita Output in the Long Run," Kyklos, Wiley Blackwell, vol. 32(1/2), pages 412-429.
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  27. Alvaro Angeriz & John McCombie & Mark Roberts, 2008. "New Estimates of Returns to Scale and Spatial Spillovers for EU Regional Manufacturing, 1986—2002," International Regional Science Review, SAGE Publishing, vol. 31(1), pages 62-87, January.
  28. Kaldor, Nicholas, 1975. "Economic Growth and the Verdoorn Law-A Comment on Mr. Rowthorn's Article," Economic Journal, Royal Economic Society, vol. 85(340), pages 891-896, December.
  29. Ute Pieper, 2003. "Sectoral regularities of productivity growth in developing countries--a Kaldorian interpretation," Cambridge Journal of Economics, Oxford University Press, vol. 27(6), pages 831-850, November.
  30. John S. L. McCombie & Mark Roberts, 2007. "Returns To Scale And Regional Growth: The Static-Dynamic Verdoorn Law Paradox Revisited," Journal of Regional Science, Wiley Blackwell, vol. 47(2), pages 179-208, 05.
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