Autonomous demand and technical change: exploring the Kaldor-Verdoorn law on a global level

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.