Application of Keynesian and convergence theories in Portugal. Differences and similarities

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, yet, 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. 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. The aim of this paper is, also, to present a further contribution, with panel data, to the analysis of absolute convergence, associated with the neoclassical theory, and conditional, associated with endogenous growth theory, of the sectoral productivity at regional level (from 1995 to 1999). The structural variables used in the analysis of conditional convergence is the ratio of capital/output, the flow of goods/output and location ratio.