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An alternative use of the Verdoorn law at the Portuguese nuts II level

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  • Martinho, Vítor João Pereira Domingues

Abstract

With this study we want to test the validity of the well known “Verdoorn´s Law” which considers the relationship between the growth of productivity and output in the case of the Portuguese economy at a regional and sectoral levels (NUTs II) for the period 1995-1999. The importance of some additional variables in the original specification of Verdoorn´s Law is also tested, such as, trade flows, capital accumulation and labour concentration. The main objective of the study is to confirm the presence of economies to scale that characterise the polarisation process with cumulative causation properties, explaining regional divergence. By introducing new variables to the original specification of Verdoorn´s Law we intend to examine how the economies to scale are influenced by the consideration of factors related to the Polarisation (Keynensian tradition) and Agglomeration (spatial economics tradition) phenomena. The results obtained from the regression analysis based on panel estimation show that the original specification of Verdoorn´s Law is more robust and confirm the presence of increasing economies to scale at both, regional and sectoral levels. However, the additional variables related to trade flows, capital accumulation and labour concentration have few influence on the performance of economies to scale.

Suggested Citation

  • Martinho, Vítor João Pereira Domingues, 2011. "An alternative use of the Verdoorn law at the Portuguese nuts II level," MPRA Paper 32189, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:32189
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    References listed on IDEAS

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    1. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July.
    2. Miguel A. Leon-Ledesma, 1998. "Economic Growth and Verdoorn's Law in the Spanish Regions, 1962-1991," Studies in Economics 9801, School of Economics, University of Kent.
    3. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    4. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
    5. Elias Soukiazis & Vitor Martinho, 2005. "Economias à Escala e Endogeneidade dos Factores Produtivos. Análise regional e sectorial ao nível das NUTs II portuguesas," Notas Económicas, Faculty of Economics, University of Coimbra, issue 22, pages 23-50, December.
    6. Martinho, Vítor João Pereira Domingues, 2011. "An alternative use of the Verdoorn law at the Portuguese nuts II level," MPRA Paper 32189, University Library of Munich, Germany.
    7. A. P. Thirlwall, 2007. "Regional Problems are "Balance-of-Payments" Problems," Regional Studies, Taylor & Francis Journals, vol. 41(sup1), pages 89-95.
    8. Rowthorn, R E, 1979. "A Note on Verdoorn's Law," Economic Journal, Royal Economic Society, vol. 89(353), pages 131-133, March.
    9. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
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    Cited by:

    1. Martinho, Vítor João Pereira Domingues, 2011. "What the keynesian theory said about Portugal?," MPRA Paper 32610, University Library of Munich, Germany.
    2. Vitor Joao Pereira Domingues Martinho, 2011. "An Alternative Use of the Verdoorn Law at the Portuguese NUTs II Level," Papers 1110.5548, arXiv.org.
    3. Martinho, Vítor João Pereira Domingues, 2011. "Application of Keynesian and convergence theories in Portugal. Differences and similarities," MPRA Paper 32910, University Library of Munich, Germany.

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    More about this item

    Keywords

    alternative Verdoorn model; Portuguese regions; sectoral and regional analysis;
    All these keywords.

    JEL classification:

    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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