Stylized growth facts

Let’s have a look at the 6 statements:

• The first statement is the observation that the shares of national income going to labor and capital are roughly constant over time. While this is still the case today, some economists have noted that, recently, the share of income going to labor has been going down.
• The second statement is that the rate of growth of capital per worker is also roughly constant over time. Thus, capital deepening appears to occur at a constant rate and does not exhibit a tendency to decline over time.
• Third, the rate of growth of output per worker is constant over time. This means that labor productivity growth is also constant over time.
• Fourth, the capital/output ratio is roughly constant over time.
• Five, the rate of return on investment is constant over time
• Finally, there are substantial differences in the rate of growth of output and labor productivity among countries

The point of Nicolas Kaldor was not that these quantities are always the same. Indeed, they can fluctuate considerably over the business cycle. Instead, Kaldor observed that these fluctuations tended to average out over time.

While Kaldor formulated these statements using data on the U.S. and the U.K., later studies found many of these facts to hold for other developed countries as well. This explains why these facts are generally referred to as stylized facts.

Summary

We discussed Kaldor’s stylised facts of growth. These are a set of statements on economic growth that seems to be quite universal. Many models created by economists will have features described by Kaldor’s stylised facts of economic growth.