Kaldor 3.0: An Empirical Investigation of the Verdoorn-augmented Technical Progress Function

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

“…Closely related to the purposes of this paper are the results obtained by Michl ( 1985 ), who was the first to estimate an extended version of Kaldor’s technical progress function, finding a Verdoorn coefficient of 0.54 and a capital accumulation coefficient of 0.40 for eight advanced countries for the period 1950–1983. More recently, Antenucci et al ( 2020 ) have estimated a positive capital accumulation coefficient and a positive Verdoorn coefficient for G7 countries, while Deleidi et al ( 2021b ) have obtained confirmation of the extended version of Kaldor’s technical progress function at the Italian regional level. 7…”

“…Starting with Michl ( 1985 ), the two effects on labour productivity growth described are combined in a single relationship reported in Eq. ( 3 ) (see also Antenucci et al, 2020 ; Deleidi et al, 2021b ): where labour productivity growth ( ) is affected by both the rate of growth of output ( ) and the rate of growth of the capital − labour ratio ( ). Equation ( 3 ) thus combines the Verdoorn effect ( ) with the effect of capital accumulation ( ) described in Kaldor’s technical progress function (Kaldor, 1957 ).…”

“…Estimated coefficients vary depending on the methods used and the temporal-spatial level of the analysis. Following part of the recent literature (Antenucci et al, 2020 ; Deleidi et al, 2020b , 2021b ), in this paper, we use P-SVAR modelling to validate Eqs. ( 3 ) and ( 5 ).…”

“…The identification of demand shocks using autonomous components of demand and P-SVAR modelling is particularly relevant in this field of research since it would allow us to solve a twofold shortcoming in the considered empirical literature. First, the use of structural models to validate the Kaldor–Verdoorn law (Antenucci et al, 2020 ; Deleidi et al, 2021b ), employing output growth rather than autonomous demand components, does not provide a meaningful economic interpretation of identified shocks because shocks associated with output can be theoretically ascribed to both supply and demand factors. Secondly, introducing demand components in a single equation modelling (Deleidi et al, 2020a , 2020b ) implies assuming the exogeneity of autonomous demand components, which would allow us to neither estimate structural shocks nor assess the dynamic evolution of demand shocks on labour productivity dynamics and therefore assess its persistence.…”

Negative Interest Rate Policy to Fight Secular Stagnation: Unfeasible, Ineffective, Irrelevant, or Inadequate?

“…This perspective can also address the supply-side claims that stagnation is caused by sluggish technological growth patterns. Indeed, when demand is considered to be the main element determining economic performance, the way is also paved for Kaldor-Verdoorn effects to reverse the causation: productivity growth is not simply exogenously driven by technical progress, but is chiefly influenced by aggregate demand (Storm 2017;Antenucci, Deleidi, and Paternesi Meloni 2020). Obviously, from a demand-led perspective technical progress is not left in the air, unexplained; rather, it can be fruitfully integrated (Deleidi and Mazzucato 2019).…”