Autonomous Demand and Technical Change: Exploring the Kaldor-Verdoorn Law on a Global Level

By Matteo Deleidi, Claudia Fontanari, Santiago J. Gahn

PKES Working Paper 2212

April 2022

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.

Keywords: Labour productivity; Autonomous demand; Panel SVAR; Penn World Table, Kaldor-Verdoorn

JEL classification: C33 E12 E24 O33 O47