Abstract:

Nicholas Kaldor’s main contribution to economic theory was his work on industry-based growth model. Kaldor’s laws examine the relationship between the industrial sector, economic growth and labor productivity. This paper aims to test the validity of Kaldor’s first and second (Kaldor-Verdoorn’s) law using symmetric Toda and Yamamoto (1995); Hacker and Hatemi-J (2006) and asymmetric Hatemi-J (2012) causality methods for Turkey covering the period of 1980-2014. According to the results of the symmetric causality tests, Kaldor’s first and second law are valid for Turkey. Toda-Yamamoto causality analysis shows that industry value added have a positive effect on both economic growth and labor productivity in the industrial sector. The asymmetric causality test results indicate that Kaldor’s first law holds in Turkey; however, Kaldor-Verdoorn’s law is invalid. These results show that development in the industrial sector promotes economic growth.

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