1. WHAT LIES BEHIND VERDOORN'S LAW? 1
- Author
-
B. L. Boulier
- Subjects
Economics and Econometrics ,Returns to scale ,Technological change ,Law ,Capital deepening ,Interwar period ,Economics ,Rationalization (economics) ,Division of labour ,Pace ,Economies of scale - Abstract
IN A justly famous article, Verdoorn (1949) examined the relations between changes in labour productivity and growth in industrial output for a number of countries prior to World War II. Using national data on growth in employment and output for fifteen countries in the interwar period and separately for individual sectors from four countries, Verdoorn found a sizeable positive relation between the rate of growth of labour productivity and the rate of growth of output. Investigations of more recent data have generally reported similar results.2 Consequently, this empirical relation has become known as Verdoorn's Law. In explanation of his findings, Verdoorn (1949) notes that "one would have expected a priori to find a correlation between labour productivity and output, given that the division of labour only comes about through increases in the volume of production; therefore the expansion of production creates the possibility of further rationalization which has the same effect as mechanisation."' Clark (1967, pp. 260-266) and Vaciago (1975) argue that Verdoorn's findings provide evidence for the existence of increasing returns to scale in the manufacturing sector. Salter (1966, pp. 144-146) and Thirlwall (1980) suggest that Verdoorn's results are explained by economies of scale, by a positive causal association between output growth and the pace of technological progress, and by capital deepening in sectors ex
- Published
- 1984