Causes of the Slow Rate of Economic Growth in the UK

The Essential Kaldor 01/1966;
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    • "When manufactured goods with higher technological content are part of the exports basket, the increase in the latter will also result in increasing returns to scale, production linkages, increased productivity, the generation of externalities through the dissemination of knowledge and technology (given the need to adapt to international production standards), and finally, a virtuous circle of growth that allows developing countries to 'catch up' (Blecker and Razmi, 2010; Hausmann et al., 2006; Hausmann and Hidalgo, 2014; Hirschman, 1958; Kaldor, 1966). "
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    ABSTRACT: In this article, we analyse the hypothesis suggesting that structural changes (oriented towards manufacturing and related services) – measured through variations in the income elasticities of a country's demands for exports and imports – are influenced by the difference between the observed real effective exchange rate and industrial equilibrium. The industrial equilibrium exchange rate is defined as the exchange rate level that equalises real unit labour costs between local producers of manufactured goods and their trading partners. To test the hypothesis in question, a sample comprising data from 64 countries for the 1995-2012 period was built. First, the effective industrial equilibrium exchange rate was calculated for these countries, in addition to the observed effective real exchange rates for each year; then, income elasticities were estimated for each country in this period. A dynamic panel data econometric model was adopted to estimate the relationship between these elasticities and the difference between the observed effective real exchange rates and the industrial equilibrium rate. The control variables included the manufactured share in value added, the exports of manufactured goods, and the current account balance. The results show a positive relationship between the dependent and independent variables, which confirms our hypothesis.
    19 th Conference of the Research Network Macroeconomics and Macroeconomic Policies, Berlim; 10/2015
    • "The Kaldor-Verdoorn Law in itself does not provide any explanation on the mechanisms underlying technical change or the existence of these increasing returns. The theoretical foundations brought to the Kaldor-Verdoorn Law by Kaldor (1966) remained verbal. Only few formal attempted micro-foundations of the law can be found in the literature. "
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    ABSTRACT: This paper proposes to analyse the micro-level sources for productivity gains at an aggre-gated level. The paper reverts to a micro-founded model of technological change in-line with the evolutionary literature. The data generated through numerical simulations are used to identify the sources of increasing returns as measured by the Kaldor-Verdoorn Law. In this respect we also aim to provide some plausible micro-foundations for this macro-economic law. The paper shows that: (i) Dynamic increasing returns appear as an emergent property of the model; (ii) micro-characteristics of technical change, as the amplitude and the frequency of changes, as well as selection mechanisms significantly shape these increasing returns.
    Understanding Economic Change: Contributions to an Evolutionary Paradigm in Economics, Edited by U.Witt and A.Chai (eds, 09/2015: chapter 7; Forthcoming.
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    • "To make progress on this agenda, we have, through meticulous cleaning, merging and verification efforts, assembled international measures of manufacturing employment shares for 63 countries from 1970 to 2010. We also have manufacturing shares in real value added (henceforth " output shares " ) for all these countries, plus for another 72. 2 The employment sample represents 82% of the world's population in 2010, 1 For some classic and more recent contributions, see Kaldor (1966), Chenery et al. (1986) "
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    ABSTRACT: We assemble a large database of countries' manufacturing employment and output shares for 1970-2010. We ask whether increased global competition and labor-displacing technological change have made it more difficult for countries to industrialize in employment, and whether there are alternative routes to prosperity. We find that: (1) All of today's rich non-oil economies enjoyed at least 18% manufacturing employment shares in the past, and often did so before becoming rich; (2) Manufacturing employment peaks at lower incomes and shares today (typically below 18%), than in the past (often over 30%); (3) Although manufacturing labor productivity grew faster than non-manufacturing labor productivity within countries, they grew at similar rates globally, because factory jobs moved to less productive countries; and (4) Manufacturing's global employment share has not declined during the last 40 years. Industrialization has become more difficult, not because the sector has eliminated labor globally, but because of heightened international competition.
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