Publication: What to Make of the Kaldor-Verdoorn Law?
dc.contributor.author | Basu, Deepankar | |
dc.contributor.author | Budhiraja, Manya | |
dc.contributor.department | Department of Economics, University of Massachusetts | |
dc.contributor.department | Department of Economics, University of Massachusetts | |
dc.date | 2023-09-24T02:53:39.000 | |
dc.date.accessioned | 2024-04-26T16:31:27Z | |
dc.date.available | 2020-04-30T00:00:00Z | |
dc.date.issued | 2020-01-01 | |
dc.description.abstract | The Kaldor-Verdoorn law refers to a positive but less than one-for-one relationship between the growth rates of output and labor productivity, with causality running from the former to the latter. Empirical research has affirmed such a relationship and have found that the Kaldor-Verdoorn coefficient lies between 0 and 1. But the interpretation of this finding remains unclear. In this paper, we present a model to derive the Kaldor-Verdoorn law. Our results show that the Kaldor-Verdoorn coefficient is jointly determined by the elasticity of factor substitution, labor supply elasticity, the profit share and the increasing returns to scale (or demand-induced technical change) parameter. Hence, estimated Kaldor-Verdoorn coefficients cannot be used, on their own, to infer the presence of aggregate increasing re- turns to scale - other than in very special cases. We also show that, perhaps surprisingly, an economy without aggregate increasing returns to scale (or without any demand-induced technical progress) can generate a Kaldor-Verdoorn coefficient that lies between 0 and 1. | |
dc.identifier.doi | https://doi.org/10.7275/17572406 | |
dc.identifier.uri | https://hdl.handle.net/20.500.14394/22268 | |
dc.relation.ispartof | UMass Amherst Economics Working Papers | |
dc.relation.url | https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1288&context=econ_workingpaper&unstamped=1 | |
dc.rights | UMass Amherst Open Access Policy | |
dc.source.issue | 2020-03 | |
dc.source.status | published | |
dc.subject | Aggregate productivity | |
dc.subject | Kaldor-Verdoorn coefficient | |
dc.subject | labor supply elasticity | |
dc.subject | CES production function. | |
dc.subject | Economics | |
dc.title | What to Make of the Kaldor-Verdoorn Law? | |
dc.type | article | |
dc.type | article | |
digcom.contributor.author | isAuthorOfPublication|email:dbasu@econs.umass.edu|institution:Department of Economics, University of Massachusetts|Basu, Deepankar | |
digcom.contributor.author | isAuthorOfPublication|email:mbudhiraja@umass.edu|institution:Department of Economics, University of Massachusetts|Budhiraja, Manya | |
digcom.date.embargo | 2020-04-30T00:00:00-07:00 | |
digcom.identifier | econ_workingpaper/286 | |
digcom.identifier.contextkey | 17572406 | |
digcom.identifier.submissionpath | econ_workingpaper/286 | |
dspace.entity.type | Publication | |
relation.isAuthorOfPublication | 43cb2d2a-4fa2-45e3-a5a0-746b6aad6849 | |
relation.isAuthorOfPublication.latestForDiscovery | 43cb2d2a-4fa2-45e3-a5a0-746b6aad6849 |
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