Labour productivity and the law of decreasing labour content

Peter Flaschel, Reiner Franke and Roberto Veneziani

Cambridge Journal of Economics, 2013, vol. 37, issue 2, 379-402

Abstract: This paper analyses labour productivity and the law of decreasing labour content (LDLC) originally formulated by Farjoun and Machover. While accepting the validity of that law, it shows that the conventional measures of labour productivity used in the literature may be rather misleading, because they are based on monetary aggregates. Theoretically and empirically sounder measures are provided by standard Marxian real labour values. The notion of labour content and the LDLC are therefore central to understanding capitalist economies. Some rigorous theoretical relations between different forms of profit-driven technical change and productivity are derived in a general input–output framework with fixed capital, and these provide foundations to the LDLC. These theoretical propositions are empirically illustrated using a new dataset of the German economy. Copyright , Oxford University Press.

Date: 2013
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