Abstract
AbstractAccording to Kaldor and Verdoorn, the evolution of output is expected to structurally enhance labour productivity by generating economies of scale. At the same time, Okun’s law suggests a pro-cyclical association between output and productivity. These two aspects of the relationship often pose challenges in empirical studies when distinguishing between short-run (à la Okun) and long-run (à la Verdoorn) effects. In light of these complexities, our paper offers three contributions. First, we discuss the extant approaches to the estimation of long-run Verdoorn effects. Second, we investigate the presence of a short-run, Okun-like effect. Third, we propose a methodological advancement to separate the cyclical from the structural relationship between output and productivity. We employ panel cointegration-based techniques on data from a large set of OECD countries over the period 1970–2019. Our findings reveal a short-run coefficient of about 0.3 between growth rates and a long-run elasticity of about 0.5 between levels.
Funder
Università degli Studi di Roma La Sapienza
Publisher
Springer Science and Business Media LLC
Cited by
2 articles.
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