Kaldor-Verdoorn's Law and Increasing Returns to Scale: A Comparison Across Developed Countries

33 Pages Posted: 21 Dec 2012

See all articles by Emanuele Millemaci

Emanuele Millemaci

University of Messina - Department of Economics, Business, Environmental Sciences and Quantitative Methods (SEAM)

Ferdinando Ofria

Università di Messina

Date Written: January 16, 2012

Abstract

The objective 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 as countries show increasing returns to scale. Capital growth and labor cost growth do not appear important in explaining productivity growth. The estimated Verdoorn coefficients are found to be substantially stable throughout the period.

Keywords: Increasing Returns, Kaldor-Verdoorn Law, Productivity Growth, Manufacturing Sector

JEL Classification: C32, O47, O57

Suggested Citation

Millemaci, Emanuele and Ofria, Ferdinando, Kaldor-Verdoorn's Law and Increasing Returns to Scale: A Comparison Across Developed Countries (January 16, 2012). FEEM Working Paper No. 92.2012. Available at SSRN: https://ssrn.com/abstract=2192520 or http://dx.doi.org/10.2139/ssrn.2192520

Emanuele Millemaci

University of Messina - Department of Economics, Business, Environmental Sciences and Quantitative Methods (SEAM) ( email )

Piazza Pugliatti, 1
Messina, 98122
Italy

Ferdinando Ofria (Contact Author)

Università di Messina ( email )

Via T. Cannizzaro, 278
Messina, 98122
Italy

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