Labor Productivity and the Law of Decreasing Labor Content


Peter Flaschel, Reiner Franke y Roberto Veneziani

University of Massachusetts Amherst

Working Paper 2010‐11

This paper analyzes labor productivity and the law of decreasing labor content (LDLC) originally formulated by Farjoun and Machover (1983). First, it is shown that the standard measures of labor productivity may be rather misleading, owing to their emphasis on monetary aggregates. Instead, the conventional classical-Marxian labor values provide the theoretically and empirically sound measures of labor productivity. The notion of labor content and the LDLC are therefore central in order to understand the dynamics of
capitalist economies. Second, some rigorous theoretical relations between different forms of prot-driven technical change and productivity are derived in a general input-output framework with ¯xed capital, which provide deterministic foundations to the LDLC. Third, the main theoretical propositions are analyzed empirically based on a new dataset of the German economy.

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