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What the keynesian theory said about Portugal?

Martinho, Vítor João Pereira Domingues (2011): What the keynesian theory said about Portugal?

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Abstract

This work aims to test the Verdoorn Law, with the alternative specifications of (1)Kaldor (1966), for the 28 NUTS III Portuguese in the period 1995 to 1999. It is intended to test, also in this work, the alternative interpretation of (2)Rowthorn (1975) about the Verdoorn's Law for the same regions and periods. With this study we want, also, to test the Verdoorn´s Law at a regional and a sectoral levels (NUTs II) for the period 1995-1999. The importance of some additional variables in the original specification of Verdoorn´s Law is also tested, such as, trade flows, capital accumulation and labour concentration. The main objective is to confirm the presence of economies to scale that characterise the polarisation process with cumulative causation properties, explaining regional divergence. By introducing new variables to the original specification of Verdoorn´s Law we intend to examine how the economies to scale are influenced by the consideration of factors related to the Polarisation (Keynensian tradition) and Agglomeration (spatial economics tradition) phenomena. This study analyses, yet, through cross-section estimation methods, the influence of spatial effects in productivity in the NUTs III economic sectors of mainland Portugal from 1995 to 1999, considering the Verdoorn relationship.

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