The Kaldor–Verdoorn law at the age of robots and AI

Abstract

This paper contributes to the literature around the Kaldor–Verdoorn law and analyses the impact of robotisation on the channels through which the law shapes labour-productivity growth. We start with a simple evolutionary reinterpretation of the law that combines Kaldorian and neo-Schumpeterian arguments. We then apply a GMM estimator to a panel of 17 industries in 25 OECD capitalist economies for the period 1990–2018. After elaborating on the general evidence of the evolutionary interpretation of the law, the estimates suggest a positive influence from robotisation: a higher robot density strengthens both the channel that ties labour productivity dynamics with mechanisation, and the one connected with the general advancement of science and technology which joins productivity to aggregate demand. This overall result is robust to several specifications of the underlying econometric model. Moreover, we find some evidence of technological unemployment out of the macroeconomic factor. Results agree with the empirical literature that suggests different impacts from robotisation on the basis of the level of economic activity considered.