Verdoorn's law and increasing returns to scale: country estimates based on the cointegration approach

Richard Harris () and A. Liu

Applied Economics Letters, 1999, vol. 6, issue 1, 29-33

Abstract: The Johansen approach to estimating long-run cointegration vectors is used with the Penn World Tables data to estimate returns to scale. Thus, this approach has the advantages of including a measure of capital, it overcomes the simultaneity problems associated with the single-equation Verdoorn law, and it involves estimating a correctly specified dynamic model in which is embedded the long-run solution(s). The results indicate that there is substantial evidence that increasing returns are the norm for the majority of countries.

Date: 1999
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DOI: 10.1080/135048599353834

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