Autonomous demand and technical change: exploring the Kaldor–Verdoorn law on a global level

Abstract

This paper aims to explain labour productivity through the lens of a Kaldorian perspective. To assess the relationship between output, demand, capital accumulation, and labour productivity, we apply Panel Structural Vector Autoregressive (P-SVAR) modelling to a dataset of 52 countries observed over a long-time span as provided by the Penn World Table. Findings validate the Kaldorian perspective and show that demand shocks—measured by government expenditures and exports—produce positive and persistent effects on labour productivity. Findings are confirmed even when the full sample is broken down to consider developed and developing countries separately.

Permanent scars: The effects of wages on productivity

“…We may argue that in the IV estimation some of the explanatory power of output growth is lost because export growth and government spending explain only part of the variation in output growth. Our estimate thus captures the effect of these components of demand rather than market expansion as such, and this would also explain the lower impact on labor productivity growth (for a similar consideration see Deleidi et al., 2022). We can therefore conclude that, even when instrumented, output growth is still a statistically significant determinant of labor productivity growth.…”