Vector Autoregressive technique is used in the analysis and results suggest that there exists a unidirectional causality from inflation to labour productivity through capital labour ratio
. Bidirectional causality between inflation and capital productivity through capital labour ratio
is also found.
Several other OECD countries, including Belgium, Canada, Finland, France, Japan, New Zealand, and Spain, have recorded sharper reductions in the growth of the capital labour ratio
than Denmark, when comparing the periods 1981-92 and 1993-2006.
We choose as structural variables: 1) the number of main lines per 100 inhabitants, 2) the capital labour ratio and 3) the existence of market liberalization.
This implies that in order to increase the steady state level, authorities must not only care about the rates of technical change, capital labour ratio, number of main lines and the fact that a market is liberalized or not, but also with every tangible and intangible factor that may be related to individual effects.
In the same way, the existence of different technologies or input markets could be reflected in the evolution of the capital labour ratio. All these variables are obtained from ITU (2008).
As far as the other variables are concerned, capital labour ratio has a notable positive impact on TFP and it is significant for all the periods (see Table 7).
(5) In the long run output will rise (approximately) in proportion to the increase in the supply of labour, as in an open economy with capital mobility that factor of production will be available to work with labour at round about the existing capital labour ratio
and rate of return.
Between 1988 and 1993 average growth in the capital labour ratio
was higher in New Zealand than in Australia (see Figure 10), and labour productivity growth was also higher in New Zealand.
Table II shows relative capital labour ratios by industry in 1979 and 1989.
Therefore, the relative capital labour ratios for these two branches should be treated with some caution.