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Erschienen in:
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2018 | OriginalPaper | Buchkapitel

12. Production Functions, the Kaldor-Verdoorn Law and Methodology

verfasst von : Marc Lavoie

Erschienen in: Alternative Approaches in Macroeconomics

Verlag: Springer International Publishing

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Abstract

Marc Lavoie in this chapter, titled ‘Production Functions, the Kaldor-Verdoorn Law and Methodology’, focuses on John McCombie contributions, and argues that he has been an unrelenting critic of the neoclassical production function for over 30 years. With his co-author Jesus Felipe, along with Anwar Shaikh, he has provided a number of proofs demonstrating that the apparent empirical successes of neoclassical production functions could be attributed to the fact that these production functions were reproducing the identities of the national accounts. Kaldor’s technical progress function and the Kaldor-Verdoorn equation, however, do share some similarities with these identities, and thus one may wonder if they are subjected to the same critique. It is shown that the Kaldor-Verdoorn equation is impervious to the critique. Some of the methodological considerations advanced by John McCombie, notably those concerning the instrumentalist approach of mainstream economics and its DSGE model, are also considered. The chapter concludes with a pledge in favour of meta-regression analysis, recalling that a recent such analysis has shown that the Kaldor-Verdoorn effect is genuine.

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Vorheriges Kapitel Urban Growth in South Asia: A View from Outer Space
Nächstes Kapitel Is the Balance of Payments Constrained Growth Rate Time-Varying? Exchange Rate Over Valuation, Policy-Induced Recessions, Deindustrialization, and Long Run Growth
Fußnoten
1
It also appeared in my book on the foundations of post-Keynesian economics (Lavoie 1992, pp. 33–36).
 
2
Shaikh (1980, p. 2005) shows that labour productivity is highly non-linear, nearly sinusoid, and hence cannot be represented by a linear trend. Regressions of the neoclassical production functions in time series will provide bad or even absurd results when technical progress is mishandled (for instance, by assuming a linear trend). A possible remedy is to include the rate of capacity utilization as an additional variable in the regression. This was indeed my personal experience when a graduate student of mine ran production regressions on Canadian data and was getting desperate until he added the rate of utilization in his regressions.
 
3
They are also discussed in my 2014 book (Lavoie 2014, ch. 1).
 
4
The authors declined to respond to my critique.
 
5
Fuller and Geide-Stevenson (2014) report that when surveyed members of the American Economic Association were confronted with the statement “A minimum wage increases unemployment among the young and unskilled workers”, in 1990, 62 per cent agreed, 20 per cent agreed with provisos and 18 per cent disagreed; in 2010, 40 per cent agreed, 34 per cent agreed with provisos and 25 per cent disagreed.
 
6
In reality, to correct for possible heteroskedasticity, meta-regressions are based on the following equation, with β 1 and β 0 keeping their previous meaning: (e i /SE i ) = t i  = β 1(1/SE i ) + β 0 + ε 2.
 
7
The absolute value of the parameter β 0 is a measure of publication bias and the authors find that its t ratio is above 10.
 
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Metadaten
Titel
Production Functions, the Kaldor-Verdoorn Law and Methodology
verfasst von
Marc Lavoie
Copyright-Jahr
2018
Buch
Alternative Approaches in Macroeconomics

Print ISBN: 978-3-319-69675-1

Electronic ISBN: 978-3-319-69676-8

Copyright-Jahr: 2018

DOI
https://doi.org/10.1007/978-3-319-69676-8_12