Verdoorn's law
Economic relationship between growth in output and growth in productivity / From Wikipedia, the free encyclopedia
Verdoorn's law is named after Dutch economist Petrus Johannes Verdoorn (1949).[1] It states that in the long run productivity generally grows proportionally to the square root of output. In economics, this law pertains to the relationship between the growth of output and the growth of productivity. According to the law, faster growth in output increases productivity due to increasing returns. Verdoorn (1949, p. 59) argued that "in the long run a change in the volume of production, say about 10 per cent, tends to be associated with an average increase in labor productivity of 4.5 per cent." The Verdoorn coefficient close to 0.5 (0.484) is also found in subsequent estimations of the law.[2]